EXHIBIT 10.45 TO CURRENT REPORT ON FORM 8-K DATED AS OF APRIL 15, 2003
ASSUMPTION AND INDEMNITY REINSURANCE AGREEMENT
THIS ASSUMPTION AND INDEMNITY REINSURANCE AGREEMENT (this "Agreement"),
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dated as of April 7, 2003, is made by and among HEALTH NET LIFE INSURANCE
COMPANY, a California domiciled life and disability insurance company (the
"Company"), and SAFEHEALTH LIFE INSURANCE COMPANY, a California domiciled life
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and disability insurance company (the "Reinsurer"). The Company and the
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Reinsurer are referred to herein collectively as the "Parties".
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WHEREAS, the Company desires to transfer and assign to the Reinsurer all of
the Company's right, title and interest in and to the Novated Dental Policies;
WHEREAS, the Reinsurer desires to assume all of the Company's duties and
obligations in connection with, relating to, or arising at any time out of such
Novated Dental Policies upon the terms and conditions set forth herein;
WHEREAS, the Company desires to cede, on an indemnity reinsurance basis, to
the Reinsurer, the Company's Policy Liabilities in connection with, relating to
and arising out of the Non-Novated Dental Policies, upon the terms and
conditions set forth herein;
WHEREAS, the Reinsurer desires to reinsure on an indemnity reinsurance
basis the Company's Policy Liabilities arising under or in connection with the
Non-Novated Dental Policies, upon the terms and conditions set forth herein; and
WHEREAS, in connection with the foregoing, the Health Net, Inc. and
SafeGuard Health Enterprises, Inc. have entered into the Purchase and Sale
Agreement dated as of April 7, 2003 (the "Purchase and Sale Agreement") which
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calls for the execution and delivery of this Agreement as of the Closing of the
transactions contemplated thereunder.
NOW, THEREFORE, in consideration of the mutual covenants and promises, and
upon the terms and conditions hereinafter set forth, the Parties hereto agree as
follows.
ARTICLE I
DEFINITIONS
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Capitalized terms used in this Agreement and not otherwise defined shall
have the meanings given such terms in the Purchase and Sale Agreement. For
purposes of this Agreement, the following terms shall have the meanings
specified below.
"Claims" shall have the meaning set forth in Section 7.03.
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"Dental Policies" means all policies or other agreements (including all
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supplements, endorsements, riders and ancillary agreements in connection
therewith) with individuals, employers or other group sponsors that obligate the
Company to provide, arrange for the provision of, or indemnify for the cost of
dental care services and dental supplies as specified therein, which policies or
other agreements (i) are in effect as of the Effective Time or (ii)
become effective after the Effective Time, including through (A) the
reinstatement of lapsed policies pursuant to provisions therein or of applicable
law, or (B) the issuance or renewal thereof by the Company after the Effective
Time to honor quotes outstanding as of the Effective Time, or to satisfy renewal
rights of individuals, employers or other group sponsors under contractual
provisions or applicable law, or (C) modifications agreed to by the Reinsurer on
behalf of the Company pursuant to the authority granted to the Reinsurer under
Section 7.01 of this Agreement, provided, however, Dental Policies shall not
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include any policy or other agreements (including all supplements, endorsements,
riders and ancillary agreements in connection therewith) with individuals,
employers or other group sponsors that obligate the Company to provide, arrange
for the provision of, or indemnify for the cost of dental care services and
dental supplies as a Medicare + Choice Preferred Provider Organization pursuant
to Contract Number P01239 by and between the Company and the Centers for
Medicare and Medicaid Services.
"Dental Services" shall have the meaning set forth in Section 7.07.
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"Dispute" shall have the meaning set forth in Section 11.02.
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"Disputed Claim" shall have the meaning set forth in Section 7.03.
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"Disputed Complaint" shall have the meaning set forth in Section 7.05.
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"Effective Time" means 11:59 p.m. Pacific Time, on the Closing Date.
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"Extra-Contractual Liabilities" means any and all liabilities and
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obligations of any nature, kind or description (i) for consequential,
extra-contractual, tort, bad faith, exemplary, punitive, special or similar
damages and (ii) for statutory or regulatory damages, fines, penalties,
forfeitures, and similar charges of a penal or disciplinary nature.
"GAAP" means generally accepted accounting principles consistently applied
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throughout the specified period and in a comparable period in the immediately
preceding year.
"JAMS" shall have the meaning set forth in Section 11.03.
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"Member Materials" shall have the meaning set forth in Section 3.01.
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"Members" means the individuals (including their covered spouses and
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covered dependents) entitled to Dental Services pursuant to Dental Policies.
"Non-Novated Dental Policies" shall have the meaning set forth in Section
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2.04.
"Novated Dental Policies" means those Dental Policies transferred to the
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Reinsurer by novation as of the Novation Date and under which Dental Policies
the Reinsurer shall have become the successor to the Company under the Dental
Policies as described in Section 2.03.
"Novation Date" shall have the meaning set forth in Section 3.02 hereof.
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"Obligations" shall have the meaning set forth in Section 2.01 hereof.
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"Policy Liabilities" means the Company's gross liabilities and obligations
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arising under or in connection with the Dental Policies to the extent the same
are unpaid or unperformed on or after the Effective Time, before deduction for
all other applicable cessions, if any, under the Company's reinsurance programs.
In addition, the term "Policy Liabilities" shall include:
(a) all Extra-Contractual Liabilities that arise from any act, error or
omission after the Effective Time, whether or not intentional, in bad
faith or otherwise, by the Reinsurer or any of its affiliates, or any
of their respective officers, employees, agents or representatives
relating to the Dental Policies, and any attorneys' fees incurred by
the Reinsurer or the Company related to such Extra-Contractual
Liabilities;
(b) all liabilities and obligations for premium taxes arising on account
of any premiums with respect to the Dental Policies allocable to
coverage after the Effective Time;
(c) all liabilities and obligations for returns or refunds of premiums
(irrespective of when due) under the Dental Policies;
(d) any assessment required by any insurance guaranty, insolvency,
comprehensive health association or other similar fund maintained by
any jurisdiction relating to the Dental Policies assessed or imposed
on the basis of premium for coverage after the Effective Time;
(e) all liabilities and obligations for commission payments and other
compensation, if any, due and payable with respect to the Dental
Policies to or for the benefit of agents and brokers to the extent
that such amount accrues after the Effective Time;
(f) all liabilities and obligations for payment of any compensation to
providers relating to Dental Services provided to Members under the
Dental Policies regardless of the "date of service"; and
(g) any obligation arising as a result of the Reinsurer 's failure to
perform its obligations pursuant to Section 7.07.
"SAP" means statutory accounting practices prescribed or permitted by
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applicable insurance regulatory authorities consistently applied throughout the
specified period and in the comparable period in the immediately preceding year.
"Services" shall have the meaning set forth in Section 7.02.
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ARTICLE II
BUSINESS TRANSFERRED AND REINSURED
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Section 2.01. Assignment of Dental Policies. As of the Effective Time
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(i) except as is otherwise provided in Section 5.01 below, the Company hereby
transfers and assigns to the Reinsurer all of the Company's right, title and
interest in the Dental Policies identified in
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Schedule 2.01 attached hereto and made a part hereof and delegates to the
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Reinsurer all of the Company's duties and obligations of performance and payment
under the Dental Policies arising after the Effective Time, and (ii) the
Reinsurer hereby accepts, assumes and agrees to perform all of the Company's
duties and obligations, whether direct, indirect, contingent, unliquidated,
unmatured or otherwise arising after the Effective Time (collectively,
"Obligations"), in connection with, relating to, or arising out of the Dental
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Policies.
Section 2.02. Novation. As soon as practicable after the Effective
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Time, the Reinsurer shall use all commercially reasonable efforts to effect the
assumption by novation by the Reinsurer of the Dental Policies (each such Dental
Policy being referred to herein as a "Novated Dental Policies" and Novated
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Dental Policies shall include any such subsequently novated Dental Policies).
If the Reinsurer does not for any reason assume by novation any Dental Policy,
then the Reinsurer shall accept and reinsure, on an indemnity reinsurance basis,
100% of the Policy Liabilities related to such Non-Novated Dental Policies in
accordance with the terms and conditions of this Agreement.
Section 2.03. Direct Obligations. To the extent that the Reinsurer assumes
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by novation any Dental Policies under applicable law, as of the Novation Date
(i) the Reinsurer shall be the successor to the Company under such Novated
Dental Policies as if such Novated Dental Policies were direct obligations
originally issued by the Reinsurer and the Reinsurer shall be responsible for
the performance of all obligations and the payment of all benefits and amounts
due under the Novated Dental Policies in accordance with their terms, (ii) the
Reinsurer shall be substituted in the place and stead of the Company, and each
Member under any such Novated Dental Policy shall disregard the Company as a
party thereto and treat the Reinsurer as if it had been originally obligated
thereunder except as otherwise provided herein, (iii) the Company shall be
released of all liability with respect to such Novated Dental Policies, (iv) the
Members under such Novated Dental Policies shall have the right to file claims
arising under such Novated Dental Policies directly with the Reinsurer and shall
have a direct right of action for indemnification, benefits and services under
such Novated Dental Policies against the Reinsurer, and the Reinsurer hereby
consents to be subject to any such direct action taken by any such Member, (v)
the Reinsurer shall be responsible for all matters relating to administration of
the Novated Dental Policies, including but not limited to policy changes,
reinstatement standards, premium rate changes, policy renewals, agent
commissions and administrative methods and procedures, and (vi) any indemnity
reinsurance of such Novated Dental Policies and related liabilities thereunder
by the Reinsurer shall cease and instead be replaced by such assumption by
novation.
Section 2.04. Indemnity Reinsurance. Effective as of the Effective Time,
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the Company shall cede to the Reinsurer, and the Reinsurer shall assume from the
Company on an indemnity reinsurance basis, 100% of the Policy Liabilities under
all Dental Policies (including those Dental Policies that are identified in
Schedule 2.01 attached hereto and made a part hereof) which the Reinsurer has
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not for any reason (including the lack of any required approval or consent of a
party to a Dental Policy) as of the Effective Time assumed by novation (each
such Dental Policy being referred to herein as a "Non-Novated Dental Policy").
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Notwithstanding the foregoing, the term "Non-Novated Dental Policy" shall not
include any Dental Policy from and after the date of its assumption by novation
at any time by the Reinsurer.
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Section 2.05. Policy Liabilities. The Reinsurer accepts, reinsures, and
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assumes the Policy Liabilities subject to any and all defenses, setoffs, and
counterclaims to which the Company would be entitled with respect to the Policy
Liabilities, it being expressly understood and agreed by the Parties hereto that
no such defenses, setoffs, or counterclaims are or shall be waived by the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, and that the Reinsurer is and shall be fully subrogated in
and to all such defenses, setoffs, and counterclaims. From and after the
Effective Time, as among the Parties, the Reinsurer shall bear and shall have
responsibility for paying or performing all Policy Liabilities. The Policy
Liabilities ceded under this Agreement shall be subject to any changes required
by law or regulation and the same rates, terms, conditions, waivers,
interpretations, modifications and alterations as the Non-Novated Dental
Policies.
ARTICLE III
ASSUMPTION CERTIFICATES; OPTION LETTERS
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Section 3.01. Member Materials. The Reinsurer shall prepare and
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deliver to every party to a Dental Policy a Notice of Transfer, Certificate of
Assumption, and Notice of Rejection of Assumption substantially in the
appropriate forms set forth in Exhibit A attached hereto (collectively, the
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"Member Materials") and otherwise acceptable to both the Reinsurer and Company,
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which shall inform each party to a Dental Policy of the proposed transfer and
enable such party to accept or reject the assumption and novation.
Section 3.02. Mailing. The Member Materials shall be mailed on a date
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agreed upon by the Reinsurer and the Company, and, to the extent required by
applicable law, shall be reviewed by and found acceptable to applicable
regulatory authorities prior to mailing. The Reinsurer shall deliver only
Member Materials that are in compliance with applicable law, regulation or
regulatory authority. No assumption by novation of a Dental Policy shall take
effect until the earlier of the acceptance of the assumption by the party to a
Dental Policy or 90 days (or such other period, if any, as may be required by
applicable law) (the "Novation Date") after Member Materials have been mailed to
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the party to such Dental Policy.
Section 3.03. Expenses. All expenses incurred by the Parties hereto
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pursuant to this Article shall be shared equally by the Parties.
ARTICLE IV
TERM
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Section 4.01. Term. This Agreement shall remain in force and effect
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until all Policy Liabilities reinsured and assumed by Reinsurer have been
discharged in full, or all Dental Policies are transferred and assumed by the
Reinsurer by novation and all obligations of the Reinsurer hereunder have been
discharged in full.
ARTICLE V
CONSIDERATION
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Section 5.01. Consideration to the Reinsurer. The Reinsurer shall be
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entitled to all premium, premium adjustments and other consideration allocable
to coverage after the Effective Time (irrespective of when due) received by the
Company or the Reinsurer with respect to the
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Dental Policies. In the event that the Company receives any premium or other
consideration with respect to a Dental Policy allocable to coverage after the
Effective Time, the Company shall promptly remit such premiums and other
consideration to the Reinsurer along with all pertinent information pertaining
thereto including the nature of the payment, source of funds, policy number and
period to which it relates. In the event that the Reinsurer receives any premium
or other consideration with respect to a contractual liability or contractual
obligation arising under a Dental Policy paid or performed by the Company prior
to the Effective Time, the Reinsurer shall promptly remit such premiums and
other consideration to the Company along with all pertinent information
pertaining thereto including the nature of the payment, source of funds, policy
number and period to which it relates.
Section 5.02. Application of Future Consideration. Any premium, premium
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adjustments and other consideration received and retained by the Reinsurer
pursuant to Section 5.01 shall be applied by the Reinsurer to the oldest unpaid
obligations or outstanding invoices relating to the period after the Effective
Time.
Section 5.03. Additional Consideration for Indemnity Reinsurance of
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Non-Novated Dental Policies. As additional consideration for the assumption by
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Reinsurer on an indemnity reinsurance basis of 100% of the Policy Liabilities
under the Non-Novated Dental Policies, the Company shall (i) transfer to
Reinsurer at the Effective Time admitted assets having a net admitted asset
value determined in accordance with SAP as prescribed or permitted by the
California Department of Insurance equal to the Company's net unearned premium
reserve and loss and loss adjustment expense (including losses that have been
incurred but not reported) reserve, if any, attributable to claims arising under
the Non-Novated Dental Policies prior to the Effective Time; and (ii) assign to
Reinsurer any amounts due to Company under any reinsurance agreements in effect
on the Effective Time between the Company and any reinsurer (other than the
Reinsurer) relating to the Policy Liabilities assumed by the Reinsurer under
this Agreement.
Section 5.04. Additional Consideration for Assumption of Novated Dental
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Policies. As additional consideration for the assumption by novation by
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Reinsurer of the Novated Dental Policies, the Company shall (i) transfer to
Reinsurer at the within five (5) Business Days after the end of the calendar
month following the Novation Date admitted assets having a net admitted asset
value determined in accordance with SAP as prescribed or permitted by the
California Department of Insurance equal to the Company's net unearned premium
reserve and loss and loss adjustment expense (including losses that have been
incurred but not reported) reserve, if any, attributable to claims arising under
the Novated Dental Policies prior to the Effective Time; and (ii) assign to
Reinsurer any amounts due to Company under any reinsurance agreements in effect
on the Effective Time between the Company and any reinsurer (other than the
Reinsurer) relating to the Novated Dental Policies assumed by the Reinsurer
under this Agreement.
ARTICLE VI
ACCOUNTING AND SETTLEMENT
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Section 6.01. Accounting Reports. On or before the last Business Day
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of each month, the Reinsurer shall provide the Company with reports of
activities under this Agreement with respect to the Non-Novated Dental Policies
for the preceding month showing any amounts due the Company or the Reinsurer, as
the case may be, as reimbursement for paid claims, premiums
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or other amounts due with respect to the Non-Novated Dental Policies and any
information required by the Statement of Statutory Accounting Principles, as
amended, of the National Association of Insurance Commissioners. On or before
the last Business Day of January, April, July and October, the Reinsurer shall
provide the Company with quarterly reports or an annual report of such
activities as appropriate.
Section 6.02. Financial Statement Information. The Reinsurer and the
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Company shall each provide the other with the financial, accounting and
actuarial information necessary to prepare SAP regulatory, tax and GAAP monthly,
quarterly and annual financial statements and returns and satisfy other
requirements including reserve and related calculations regarding the
Non-Novated Dental Policies in the form reasonably required by the Reinsurer and
the Company. The Company and the Reinsurer shall agree to mutually acceptable
procedures and time schedules for the transmission and receipt of such
information.
Section 6.03. Settlements. Within ten (10) Business Days after delivery of
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each monthly report, the Reinsurer and the Company shall settle on an estimated
basis, all amounts then due under this Agreement for that month. The Reinsurer
and the Company shall make a final settlement of all amounts due for each
calendar year within twenty (20) Business Days after the delivery of the annual
report referred to in Section 6.01 hereof.
Section 6.04. Net Payment Basis. Amounts payable under this Agreement by
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the Parties hereto shall be settled against each other, dollar for dollar, and
only a net payment shall be due; provided, however, that no balance or amount
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due by the Parties under any other agreement shall be offset against any
obligation arising under this Agreement.
Section 6.05. Late Payments. Should any payment due any party be received
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by such party more than sixty (60) days after the due date for such payment
under this Agreement, interest shall accrue from the date on which such payment
was due (taking into account the provisions of 6.06 hereof) until payment is
received by the party entitled thereto, at an annual rate equal to the Bank of
America Reference Rate quoted for six month periods as reported in The Wall
Street Journal on the first Business Day of the month in which such payment
first becomes due.
Section 6.06. Federal Funds. All settlements in accordance with this
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Agreement shall be made by wire transfer of immediately available funds on the
due date, or if such day is not a Business Day, on the next day which is a
Business Day. Payment may be made by check payable in immediately available
funds in the event the party entitled to receive payment has failed to provide
wire transfer instructions.
Section 6.07. Reports to Regulatory Authorities. During the term of this
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Agreement, the Reinsurer and the Company shall promptly furnish the other copies
of any and all filings with, and reports or communications received from, any
regulatory authority which relates directly and materially to the Non-Novated
Dental Policies, including, without limitation, each annual statement, each
quarterly financial report to the regulatory authority of the party's domicile
having principal jurisdiction over the party and each report on periodic
examination issued by such regulatory authority to the extent it relates to the
Non-Novated Dental Policies.
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ARTICLE VII
DENTAL POLICY ADMINISTRATION; REPORTING
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Section 7.01. Administration of Non-Novated Dental Policies. The
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Company hereby grants the Reinsurer authority in all matters relating to
administration of the Non-Novated Dental Policies to the fullest extent such
authority may be granted pursuant to applicable law. In furtherance of the
foregoing, the Company hereby nominates, constitutes and appoints the Reinsurer
as its attorney-in-fact with respect to the rights, duties, privileges and
obligations of the Company in and to the Non-Novated Dental Policies, with full
power and authority to act in the name, place and stead of the Company with
respect to the Non-Novated Dental Policies.
Section 7.02. Administration. The Reinsurer shall, at its expense, provide
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the technical and administrative service, assistance and support functions
described in Schedule 7.02 attached hereto (the "Services") reasonably necessary
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or appropriate for the proper management and administration of the Non-Novated
Dental Policies, which shall include, but not be limited to, Services required
for the proper administration of the Non-Novated Dental Policies prior to the
Effective Time and not performed as of the Effective Time. The Services at all
times shall be consistent with the Company's prevailing practices and procedures
as of the Effective Time with respect to similar types of policies actually
communicated by the Company to Reinsurer and all applicable laws, regulations,
and regulatory actions and pronouncements. (As used elsewhere in this
Agreement, the terms "prevailing practices and procedures" will refer to the
Company's prevailing practices and procedures as of the Effective Time
communicated by the Company to the Reinsurer).
Section 7.03. Claims Payment Instructions. The Reinsurer at its own cost
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shall administer and process all payments to reimburse providers and Members for
covered Dental Services under the Non-Novated Dental Policies (the "Claims") in
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conformance with the Company's prevailing practices and procedures with respect
to similar types of policies, including review, investigation, adjustment,
settlement, defense and payment of Claims, special investigation and anti-fraud
compliance, and preparation of any report required concerning the foregoing
Services and will, in connection with such Claims administration, retain, at its
sole discretion and cost, any outside investigation firms, adjusters, attorneys
or other professionals that the Reinsurer deems necessary in the adjustment of
such Claims. If a Claim arising prior to the Effective Time under a Non-Novated
Dental Policy is presented that the Reinsurer in good faith disputes, the
Reinsurer shall consult with the Company. If, after such consultation, the
Reinsurer and the Company disagree as to how to resolve a Claim, the Company
shall be entitled to assume, at its own expense, the control of the handling or
the defense of such a disputed Claim (a "Disputed Claim"), including employment
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of counsel. The Company shall apprise the Reinsurer of and consult with the
Reinsurer with respect to the progress of a Disputed Claim. In exercising such
control, the Company shall act in good faith in accordance with generally
accepted claims practices of similar insurance companies under similar
circumstances. Any payment of any portion of a Disputed Claim made by the
Company shall be added to the Policy Liabilities and shall be unconditionally
binding on the Reinsurer; provided, however, that if the Company receives an
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offer of settlement or compromise from the other parties to a Disputed Claim for
a particular amount or obtains a commitment from such other parties that they
would accept a compromise or settlement requiring only the payment of a specific
amount, the granting of an appropriate release or similar accommodation, and the
Company, after mandatory
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consultation with and over the objection of the Reinsurer, refuses to consent
thereto and elects to continue to dispute or otherwise pursue such Disputed
Claim, then the liability of the Reinsurer with respect of such Disputed Claim
shall be deemed limited to that amount including expenses which the Company
would have been liable if such compromise or settlement had been accepted by the
Company.
Section 7.04. Communications Relating to Non-Novated Dental Policies.
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On and after the Effective Time, the Company shall forward promptly to the
Reinsurer all notices and other written communications it receives relating to
the Non-Novated Dental Policies (including all inquiries or complaints from
state insurance regulators, agents, brokers and Members and all notices of
claims, suits and actions for which it receives service of process). The
Company shall be entitled to retain copies of all such materials.
Section 7.05. Complaint Handling Procedure. The Parties shall cooperate
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with each other in providing information necessary to respond to any inquiries
and complaints concerning the Non-Novated Dental Policies. All inquiries and
complaints concerning the Non-Novated Dental Policies received by the Company
shall be forwarded immediately by facsimile or overnight mail to a contact
person designated by the Reinsurer for reply. After consultation with the
Company, except as provided below, the Reinsurer shall answer all inquiries and
complaints received by it concerning the Non-Novated Dental Policies. If the
Reinsurer and the Company disagree as to the appropriate response to an inquiry
or complaint, the Company shall be entitled to assume, at its own expense, the
control of the handling of the response to such inquiry or complaint (a
"Disputed Complaint"), including employment of counsel. The Company shall
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apprise the Reinsurer of and consult with the Reinsurer with respect to the
progress of a Disputed Complaint. In exercising such control, the Company shall
act in good faith consistent with the Company's prevailing practices and
procedures as of the Effective Time with respect to similar inquiries or
complaints. Any payment arising out of a Disputed Complaint controlled by the
Company, to the extent such payment constitutes an Extra Contractual Liability,
shall be added to the Policy Liabilities and shall be unconditionally binding on
the Reinsurer; provided, however, that if the Company receives an offer of
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settlement or compromise from the other parties to a Disputed Complaint for a
particular amount or obtains a commitment from such other parties that they
would accept a compromise or settlement requiring only the payment of a specific
amount, the granting of an appropriate release or similar accommodation, and the
Company, after mandatory consultation with and over the objection of the
Reinsurer, refuses to consent thereto and elects to continue to dispute or
otherwise pursue such Disputed Complaint, then the liability of the Reinsurer
with respect of such Disputed Complaint shall be deemed limited to that amount
including expenses for which the Company would have been liable if such
compromise and settlement had been accepted by the Company. Upon answering such
inquiries or complaints, the Reinsurer shall furnish the Company with a copy of
the complaint file. The Reinsurer shall be solely responsible for maintaining
any complaint files, complaint registers or other reports of any kind, which are
required to be maintained under applicable law.
Section 7.06. Filings. The Reinsurer shall handle all compliance and
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regulatory matters relating to the administration of the Non-Novated Dental
Policies, including monitoring changes in applicable law, filing and refiling
forms and rates, and preparing and filing all reports and other filings required
by applicable law. The Reinsurer shall provide to the Company copies of
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all reports and filings with respect to the Non-Novated Dental Policies required
to be made with any Governmental Authority.
Section 7.07. Provider Services. In fulfilling its Obligations pursuant to
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Section 2.01, the Reinsurer shall provide, arrange for the provision of, or
indemnify for the cost of dental care services and supplies ("Dental Services")
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required to satisfy all obligations with respect to the provision of Dental
Services to Members and their dependents under the Non-Novated Dental Policies.
The Reinsurer shall be responsible for the recruitment, credentialing and
management of, and for contracting with, or gaining access to dental care and
service providers adequate for the delivery of all Dental Services to Members
required by or incidental to the Non-Novated Dental Policies.
Section 7.08. Administration of Novated Dental Policies. Except for those
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services to be provided to the Reinsurer by the Company pursuant to the
Transition Services Agreement, administration and servicing of the Novated
Dental Policies shall be the sole responsibility of the Reinsurer.
Section 7.09. Communications Relating to Novated Dental Policies. On and
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after the Effective Time, the Company shall forward promptly to the Reinsurer
all notices and other written communications received by it relating to the
Novated Dental Policies (including all inquiries or complaints from state
insurance regulators, agents, brokers and insureds and all notices of claims,
suits and actions for which it receives service of process). The Company shall
be entitled to retain copies of all such materials.
Section 7.10. Novation Reports. Within ten (10) Business Days after the end
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of each month after the Effective Time, beginning with the month in which the
first novation of an Dental Policy occurs, the Reinsurer shall provide to the
Company a report indicating all Dental Policies that have been the subject of a
novation by the Reinsurer during the prior month.
Section 7.11. Inspection. Each party hereto and its respective authorized
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representatives shall have the right, upon prior written notice, at reasonable
times during normal business hours, to inspect and review all books, records,
accounts, reports, tax returns, files and information of the other party hereto
reasonably relating to this Agreement. The Parties shall keep all non-public
information received from the other party strictly confidential, and unless
otherwise required by applicable Law or Governmental Authority, shall not
disclose any of the same without obtaining the prior approval of the party
providing the information. The rights of the Parties under this Section 7.11
shall survive termination of this Agreement.
ARTICLE VIII
REGULATORY APPROVALS; STATEMENT CREDIT
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Section 8.01. Regulatory Approvals. The consummation of this Agreement
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and the transactions contemplated hereby are expressly contingent upon and
subject to obtaining any and all such approvals and consents as may be required
by applicable law, regulation, or Governmental Authority. No provision in this
Agreement shall be deemed to require any party hereto to take any action
prohibited by applicable law, regulation, or regulatory authority. The form of
any application for any such approvals or consents as may be required by
applicable law,
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regulation, or Governmental Authority shall be approved by the Company and the
Reinsurer prior to the filing of any such application.
Section 8.02. Statement Credit. The Reinsurer shall at its own expense
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take all actions reasonably necessary to permit the Company to obtain full
financial statement credit in all applicable jurisdictions for the reinsurance
provided to it by the Reinsurer and the assumptions by novation pursuant to this
Agreement, including, if necessary, posting acceptable security.
ARTICLE IX
INDEMNIFICATION
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Section 9.01. Indemnification by the Reinsurer. The Reinsurer shall
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indemnify, defend and hold the Company harmless from and against all Policy
Liabilities and all losses, liabilities, claims, damages and expenses (including
reasonable attorneys' fees and expenses) that are based upon or arise out of the
breach of any obligation of the Reinsurer provided for in this Agreement.
Section 9.02. Indemnification by the Company. The Company shall indemnify
-------------------------------
the Reinsurer against, and hold them harmless from, all losses, liabilities,
claims, damages and expenses (including reasonable attorneys' fees and expenses)
that are based upon or arise out of the breach of any obligation of the Company
provided for in this Agreement.
ARTICLE X
INSOLVENCY
----------
Section 10.01. Payments by the Reinsurer. With respect to any
----------------------------
Non-Novated Dental Policy, the Reinsurer hereby agrees that all amounts due
under this Agreement with respect to the Non-Novated Dental Policies shall be
payable by the Reinsurer to any conservator, liquidator, or statutory successor
of the Company on the basis of the claims allowed against the Company by any
court of competent jurisdiction or by any conservator, liquidator, or statutory
successor of the Company having authority to allow such claims, without
diminution because of that insolvency, or because the conservator, liquidator,
or statutory successor has failed to pay all or a portion of any claims.
Payments by the Reinsurer as set forth in this Section 10.01 shall be made
directly to the Company or to its conservator, liquidator, or statutory
successor, except where the Non-Novated Dental Policy specifically provides
another payee of such reinsurance in the event of the insolvency of the Company.
Section 10.02. Claims. It is agreed that in the event of the insolvency of
------
the Company, the liquidator, receiver or other statutory successor of the
Company shall give prompt written notice to the Reinsurer of the pendency or
submission of a Claim under the Non-Novated Dental Policies reinsured hereunder.
During the pendency of such claim, the Reinsurer may investigate such Claim and
interpose, at its own expense, in the proceeding where such claim is to be
adjudicated, any defense available to the Company or its receiver. The expense
thus incurred by the Reinsurer is chargeable against the Company, subject to any
court approval, as a part of the expense of insolvency, liquidation, or
rehabilitation to the extent of a proportionate share of the benefit which
accrues to the Company solely as a result of the defense undertaken by the
Reinsurer.
-11-
Section 10.03. Novated Dental Contacts. All amounts due a Member under the
-----------------------
Novated Dental Policies shall be payable by the Reinsurer on the basis of the
liability of the Reinsurer under the Novated Dental Policies, without diminution
because of the insolvency of the Company. Any benefits or amounts due to
Members with respect to a Novated Dental Policy shall be paid or performed by
the Reinsurer in accordance with the Novated Dental Policy.
ARTICLE XI
ARBITRATION
-----------
Section 11.01. Conciliation. If a dispute between any of the Parties
------------
relating to this Agreement is not resolved within ten (10) Business Days from
the date that any party has notified another party that such dispute exists,
then such dispute shall be submitted on the next Business Day for conciliation
to a senior executive officer or his or her designee of each party. If such
senior executive officers are unable to resolve the dispute within fifteen (15)
Business Days from the date that it is first presented to them, then such
dispute shall be referred to binding arbitration.
Section 11.02. Arbitration. In the event of any dispute between the Parties
-----------
hereto relating to, arising out of, or in connection with any provision of this
Agreement (hereinafter a "Dispute"), the Parties to this Agreement and their
representatives, designees, successors and assigns agree that any such Dispute
shall be settled by binding arbitration to take place in Orange County,
California.
Section 11.03. Appointment of Arbitrator. Any arbitration hereunder shall
--------------------------
be conducted by a single arbitrator chosen from the panel of arbitrators of the
Judicial Arbitration & Mediation Services ("JAMS") with experience and expertise
in the dental HMO or dental indemnity insurance business. If a JAMS arbitrator
with specific experience in the dental HMO or dental indemnity insurance
business is not available, the arbitrator must have general experience in the
health insurance industry. Within ten (10) days of notice of a Dispute from
Company to Reinsurer or notice from Reinsurer to Company, the Company and
Reinsurer shall use their best efforts to choose a mutually agreeable
arbitrator. If the Company and the Reinsurer cannot agree on an arbitrator, the
arbitrator shall promptly be selected by JAMS.
Section 11.04. Procedures. The party submitting a Dispute to arbitration
----------
hereunder shall present its case to the arbitrator and the other party hereto in
written form within twenty (20) days after the appointment of the arbitrator.
The other party hereto shall then have twenty (20) days to submit a written
response to the arbitrator and the original party who submitted the Dispute to
arbitration. After timely receipt of each party's case, the arbitrator shall
have twenty (20) days to render his or her decision.
Section 11.05. Applicable Law. The arbitrator is relieved from judicial
---------------
formalities and, in addition to considering the rules of law, the limitations
contained in this Agreement and the customs and practices of the health care
industry, shall make his or her award with a view to effectuating the intent of
this Agreement.
Section 11.06. Decisions Final. The decision of the arbitrator shall
----------------
be final and binding upon the Parties, and judgment may be entered thereon in a
court of competent jurisdiction.
-12-
Section 11.07. Costs. Each party shall bear its own cost of arbitration,
-----
and the costs of the arbitrator shall be shared equally by the Parties.
Section 11.08. Equitable Relief. Sections 11.01 and 11.02 shall not apply
-----------------
to any claim for equitable relief, including, without limitation, claims for
specific performance, a preliminary injunction, or a temporary restraining
order. Such claims shall be submitted to a court of competent jurisdiction, and
neither party shall be required to post any bond or other security. If a party
chooses to pursue equitable relief, such conduct shall not constitute a waiver
of, or be deemed inconsistent with, the arbitration provisions set forth in this
Article XI. Once the claims for equitable relief are finally decided, any and
all remaining claims shall be submitted to arbitration pursuant to Section 11.02
and the arbitrator shall be bound by the findings and rulings of the court on
the claims for equitable relief.
Section 11.09. Survival of Article. This Article XI shall survive
---------------------
termination of this Agreement.
ARTICLE XII
MISCELLANEOUS
-------------
Section 12.01. Notices. Any notice or other communication required or
-------
permitted hereunder shall be in writing and shall be delivered by hand by
certified process server, certified or registered mail (postage prepaid and
return receipt requested), by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or by facsimile (with request for
immediate confirmation of receipt in a manner customary for communications of
such respective type). Notices shall be effective upon receipt and shall be
addressed as follows:
If to the Reinsurer:
SafeGuard Health Enterprises, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President and General Counsel
SafeGuard Health Enterprises, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
-13-
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ and Price, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
Health Net, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇: (▇▇▇) ▇▇▇-▇▇▇▇
All notices and other communications required or permitted under the terms
of this Agreement that are addressed as provided in this Section shall (i) if
delivered personally or by overnight express, be deemed given upon delivery;
(ii) if delivered by facsimile transmission, be deemed given when electronically
confirmed; and (iii) if sent by registered or certified mail, be deemed given
when received. Any party from time to time may change its address for notice
purposes by giving a similar notice specifying a new address, but no such notice
shall be deemed to have been given until it is actually received by the party
sought to be charged with the contents thereof.
Section 12.02. Entire Agreement. This Agreement (including the Exhibits and
----------------
Schedules hereto) and the Transaction Agreements contain the entire agreement
and understanding among the Parties with respect to the transactions
contemplated hereby, and supersedes all prior agreements and understandings,
written or oral, with respect thereto.
Section 12.03. Expenses. Except as otherwise expressly provided in this
--------
Agreement, whether or not the transactions contemplated hereby are consummated,
each of the Parties hereto shall pay its own costs and expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.
Section 12.04. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument and shall become effective when one or
more counterparts have been signed by each of the Parties and delivered to the
other Parties.
-14-
Section 12.05. No Third Party Beneficiary. Except as otherwise
-----------------------------
specifically provided in this Agreement, nothing in this Agreement is intended
or shall be construed to give any person, other than the Parties hereto, their
successors and permitted assigns, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provisions contained herein, and
Reinsurer shall not be directly liable hereunder to any Member under any
Non-Novated Dental Policy.
Section 12.06. Amendment. This Agreement may only be amended or modified by
---------
a written instrument executed on behalf of the Parties hereto and any such
amendment shall be subject to receipt of any and all consents, approvals,
permits and authorizations required to be obtained from Governmental
Authorities.
Section 12.07. Assignment; Binding Effect. Neither this Agreement nor any
---------------------------
of the rights, interests or obligations under this Agreement shall be assigned,
in whole or in part, by either of the Parties hereto without the prior written
consent of the other party, and any such assignment that is attempted without
such consent shall be null and void. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the Parties and their respective successors and permitted assigns.
Section 12.08. Invalid Provisions. If any provision of this Agreement is
-------------------
held to be illegal, invalid, or unenforceable under any present or future law,
and if the rights or obligations of the Parties under this Agreement will not be
materially and adversely affected thereby, (a) such provision shall be fully
severable; (b) this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part hereof;
and (c) the remaining provisions of this Agreement shall remain in full force
and effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance herefrom.
Section 12.09. Duty of Cooperation. Each party hereto shall cooperate fully
-------------------
with the other party hereto in all reasonable respects in order to accomplish
the objectives of this Agreement.
Section 12.10. Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of California.
Section 12.11. Waiver. Any term or condition of this Agreement may be
------
waived in writing at any time by the party that is entitled to the benefit
thereof. A waiver on one occasion shall not be deemed to be a waiver of the
same or any other breach or nonfulfillment on a future occasion. All remedies,
either under the terms of this Agreement, or by law or otherwise afforded, shall
be cumulative and not alternative, except as otherwise provided by law.
Section 12.12. Errors and Omissions. Inadvertent delays, errors or
----------------------
omissions that occur or are made in connection with the transactions
contemplated by this Agreement shall not relieve any party from any liability
that would have attached had such delay, error or omission not occurred,
provided that such error or omission is rectified by the party making such error
or omission as soon as possible after discovery thereof and such error or
omission does not prejudice any other party.
-15-
Section 12.13. Interpretation. For purposes of this Agreement, the terms
--------------
"hereof", "herein", "hereto", "hereunder", and derivative or similar words refer
----- ------ ------ ---------
to this Agreement (including the exhibits hereto) as a whole unless otherwise
indicated. Whenever the words "include", "includes" or "including" are used in
------- -------- ---------
this Agreement, they shall be deemed to be followed by the words "without
-------
limitation". Whenever the singular is used herein, the same shall include the
----
plural, and whenever the plural is used herein, the same shall include the
singular, where appropriate. The headings used in this Agreement have been
inserted for convenience and do not constitute matter to be construed or
interpreted in connection with this Agreement.
Section 12.14. Business Associate. In performing functions, activities, or
------------------
services for, or on behalf of, the Company involving the use or disclosure of
Protected Health Information, as that term is defined in 45 CFR 164.501, the
Reinsurer shall comply with the Business Associate Addendum set forth in
Schedule 12.14 hereto.
---------------
IN WITNESS WHEREOF, the Company and the Reinsurer have each executed this
Agreement as of the date first written above.
SAFEHEALTH LIFE INSURANCE COMPANY
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Senior Vice President and Secretary
HEALTH NET LIFE INSURANCE COMPANY
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
-16-
SCHEDULE 2.01
HEALTH NET LIFE INSURANCE COMPANY
DENTAL POLICIES
The Dental Policies identified by group and individual contract number and
name:
To be determined as of the Effective Time
-1-
SCHEDULE 7.02
SERVICES
The Reinsurer agrees to perform, consistent with the Company's prevailing
practices and procedures and the terms of the Non-Novated Dental Policies, all
services reasonably necessary for, and incident to the proper management and
administration of, the Non-Novated Dental Policies, including but not limited to
the following services:
A. All Member services relating to the Non-Novated Dental Policies including
the following:
1. Billing and collection of premiums;
2. Process and payment of claims;
3. Handle Member service requests (including adding new Members to group
Dental Policies, deleting Members from group Dental Policies),
administration of COBRA responsibilities, inquiries and complaints
relating to the Non-Novated Dental Policies;
4. Preparation and mailing of premium notices on a timely basis to
Members and parties to the Non-Novated Dental Policies; transmission
of additional premium notices, lapse notices, reinstatement offers and
other notices to Members and parties to Dental Policies;
5. Underwriting and processing of any and all policy changes and
reinstatements;
6. Member mailings of any necessary endorsements or other contract
documents;
7. Preparation of quarterly financial statement data (within ten Business
Days after the end of a calendar quarter) and annual financial
statement data (within 35 calendar days after the end of the calendar
year), for inclusion in the Company's applicable financial statements;
8. Administration of any agreement providing for the payment of
commissions relating to any Non-Novated Dental Policy;
9. Development, as necessary, and maintenance of computer systems
required to provide the Services.
10. Recruitment, credentialing and management of, and contracting with
sufficient dental providers adequate for the delivery of all Dental
Services to Members required by or incidental to the Non-Novated
Dental Policies as determined by applicable law.
-2-
B. All services performed by the Reinsurer's employees providing legal,
compliance, actuarial, accounting, treasury, human resources and data
processing, including the preparation of financial and other relevant
reports.
-3-
SCHEDULE 12.14
BUSINESS ASSOCIATE ADDENDUM
This Business Associate Addendum (the "Addendum") supplements and is made a part
of the Assumption and Indemnity Reinsurance Agreement (the "Agreement") by and
between Health Net Life Insurance Company (the "Company") and SafeHealth Life
Insurance Company (the "Reinsurer"), and is effective as of the effective date
of the Agreement.
Recitals
A. The Company may disclose certain information to the Reinsurer pursuant to
the terms of the Agreement, some of which may constitute Protected Health
Information, as defined below.
B. The parties intend to protect the privacy and provide for the security of
Protected Health Information in compliance with the Health Insurance
Portability and Accountability Act of 1996, Public law No. 104-191
("HIPAA") and the regulations promulgated thereunder by the U.S. Department
of Health and Human Services (the "HIPAA Regulations") and other applicable
laws.
C. The purpose of this Addendum is to satisfy certain standards and
requirements of HIPAA and the HIPAA Regulations, including, but not limited
to, 45 CFR 164.502(e) and 45 CFR 164.504(e).
In consideration of the mutual promises below and the exchange of information
pursuant to the Agreement and this Addendum, the parties agree as follows:
1. Definitions
(a) Business Associate means the Reinsurer to the extent it performs
functions, activities, or services for, or on behalf of, the Company pursuant to
the Agreement involving the use or disclosure of Protected Health Information.
(b) Covered Entity means the Company.
(c) "Privacy Rule" means the Standards for Privacy of Individually
Identifiable Health Information at 45 CFR part 160 and part 164, subparts A and
E.
(d) "Protected Health Information" has the same meaning as the term
"protected health information" in 45 CFR 164.501, limited to the information
created or received by Business Associate from or on behalf of Covered Entity.
(e) Capitalized terms used but not otherwise defined in this Addendum have
the same meaning as those terms in the Privacy Rule.
-4-
2. Obligations and Activities of Business Associate
(a) Business Associate shall not use or disclose Protected Health
Information other than as permitted or required by this Addendum or as Required
By Law.
(b) Business Associate shall use appropriate safeguards to prevent use or
disclosure of the Protected Health Information other than as provided for by the
Agreement and this Addendum.
(c) Business Associate agrees to mitigate, to the extent practicable, any
harmful effect that is known to Business Associate of a use or disclosure of
Protected Health Information by Business Associate in violation of the
requirements of this Addendum.
(d) Business Associate shall report to Covered Entity any use or disclosure
of the Protected Health Information not provided for by this Addendum of which
it becomes aware.
(e) Business Associate shall ensure that any agent, including a
subcontractor, to whom it provides Protected Health Information received from,
or created or received by Business Associate on behalf of, Covered Entity agrees
to the same restrictions and conditions that apply through this Addendum to
Business Associate with respect to such information.
(f) Business Associate shall provide access, at the request of Covered
Entity, and in the time and manner designated by Covered Entity, to Protected
Health Information in a Designated Record Set, to Covered Entity or, as directed
by Covered Entity, to an Individual in order to meet the requirements under 45
CFR 164.524
(g) Business Associate agrees to make any amendment(s) to Protected Health
Information in a Designated Record Set that the Covered Entity directs or agrees
to pursuant to 45 CFR 164.526 at the request of Covered Entity or an Individual,
and in the time and manner designated by Covered Entity.
(h) Business Associate agrees to make its internal practices, books, and
records, including policies and procedures, relating to the use and disclosure
of Protected Health Information received from, or created or received by
Business Associate on behalf of, Covered Entity available to the Secretary, in a
time and manner designated by the Secretary, for purposes of the Secretary
determining Covered Entity's compliance with the Privacy Rule.
(i) Business Associate agrees to document such disclosures of Protected
Health Information and information related to such disclosures as would be
required for Covered Entity to respond to a request by an Individual for an
accounting of disclosures of Protected Health Information in accordance with 45
CFR 164.528.
(j) Business Associate agrees to provide to Covered Entity, in the time and
manner designated by Covered Entity, information collected in accordance with
Section (2)(i) of this Addendum, to permit Covered Entity to respond to a
request by an Individual for an accounting of disclosures of Protected Health
Information in accordance with 45 CFR 164.528.
3. Permitted Uses and Disclosures by Business Associate General Use and
Disclosure Provisions
-5-
Except as otherwise limited in this Addendum, Business Associate may use or
disclose Protected Health Information to perform functions, activities, or
services for, or on behalf of, Covered Entity as specified in the Agreement,
provided that such use or disclosure would not violate the Privacy Rule if done
by Covered Entity.
4. Specific Use and Disclosure Provisions
(a) Except as otherwise limited in this Addendum, Business Associate may use
Protected Health Information for the proper management and administration of
Business Associate or to carry out the legal responsibilities of Business
Associate.
(b) Except as otherwise limited in this Addendum, Business Associate may
disclose Protected Health Information for the proper management and
administration of Business Associate, provided that disclosures are Required By
Law, or Business Associate obtains reasonable assurances from the person to whom
the information is disclosed that it will remain confidential and used or
further disclosed only as Required By Law or for the purpose for which it was
disclosed to the person (which purpose shall be consistent with the limitations
imposed by this Addendum) and the person notifies the Business Associate of any
instances of which it is aware in which the confidentiality of the information
has been breached.
(c) Except as otherwise limited in this Addendum, Business Associate may use
Protected Health Information to provide Data Aggregation services to Covered
Entity as permitted by 42 CFR 164.504(e)(2)(i)(B).
(d) Business Associate may use Protected Health Information to report
violations of law to appropriate Federal and State authorities, consistent with
45 CFR 164.502(j)(1).
5. Obligations of Covered Entity Provisions for Covered Entity To Inform
Business Associate of Privacy Practices and Restrictions
(a) Covered Entity shall notify Business Associate of any limitation in its
notice of privacy practices in accordance with 45 CFR 164.520, to the extent
that such limitation may affect Business Associate's use or disclosure of
Protected Health Information.
(b) Covered Entity shall notify Business Associate of any changes in, or
revocation of, permission by an Individual to use or disclose Protected Health
Information, to the extent that such changes may affect Business Associate's use
or disclosure of Protected Health Information.
(c) Covered Entity shall notify Business Associate of any restriction on the
use or disclosure of Protected Health Information that Covered Entity has agreed
to in accordance with 45 CFR 164.522, to the extent that such restriction may
affect Business Associate's use or disclosure of Protected Health Information.
(d) Covered Entity shall not request Business Associate to use or disclose
Protected Health Information in any manner that would not be permissible under
the Privacy Rule if done by Covered Entity, except as permitted by Sections 4(b)
and 4(c) of this Addendum.
-6-
6. Term and Termination
(a) This Addendum shall be effective as of the effective date of the
Agreement, and shall terminate when all of the Protected Health Information
provided by Covered Entity to Business Associate, or created or received by
Business Associate on behalf of Covered Entity, is destroyed or returned to
Covered Entity, or, if it is infeasible to return or destroy Protected Health
Information, protections are extended to such information, in accordance with
the termination provisions in this Section.
(b) Upon Covered Entity's knowledge of a material breach of this Addendum by
Business Associate, Covered Entity shall either: (i) provide an opportunity for
Business Associate to cure the breach or end the violation and terminate this
Addendum, and the provision for performance of functions, activities, or
services for, or on behalf of Covered Entity under the Agreement, if Business
Associate does not cure the breach or end the violation within the time
specified by Covered Entity; (ii) immediately terminate this Addendum, and the
provision for performance of functions, activities, or services for, or on
behalf of Covered Entity under the Agreement, if Business Associate has breached
a material term of this Addendum and cure is not possible; or (iii) if neither
termination nor cure is feasible, report the violation to the Secretary.
(c) Effect of Termination.
(i) Except as provided in paragraph (ii) of this section, upon termination
of this Addendum, for any reason, Business Associate shall return or
destroy all Protected Health Information received from Covered Entity, or
created or received by Business Associate on behalf of Covered Entity, and
shall retain no copies of the Protected Health Information. This provision
shall apply to Protected Health Information that is in the possession of
subcontractors or agents of Business Associate.
(ii) In the event that Business Associate determines that returning or
destroying the Protected Health Information is infeasible, Business
Associate shall provide to Covered Entity notification of the conditions
that make return or destruction infeasible. Upon mutual agreement that
return or destruction of Protected Health Information is infeasible,
Business Associate shall extend the protections of this Addendum to such
Protected Health Information and limit further uses and disclosures of such
Protected Health Information to those purposes that make the return or
destruction infeasible, for so long as Business Associate maintains such
Protected Health Information.
7. Miscellaneous
(a) Regulatory References. A reference in this Addendum to a section in the
----------------------
Privacy Rule means the section as in effect or as amended.
(b) Amendment. The Parties agree to take such action as is necessary to
---------
amend this Addendum from time to time as is necessary for Covered Entity to
comply with the requirements of the Privacy Rule and the HIPAA.
(c) Survival. The respective rights and obligations of Business Associate
--------
under Section 6(c) of this Addendum shall survive the termination of this
Addendum.
-7-
(d) Interpretation. The provisions of this Addendum shall prevail over any
--------------
provisions in the Agreement that may conflict with or appear inconsistent with
any provision of this Addendum. Any ambiguity in this Addendum shall be
resolved to permit Covered Entity to comply with the Privacy Rule.
-8-
EXHIBIT A
---------
TO ASSUMPTION AND INDEMNITY REINSURANCE AGREEMENT
MEMBER MATERIALS
NOTICE OF TRANSFER (Arizona and California)
Dear Policyholder:
This notifies you of an agreement reached between Health Net Life Insurance
Company ("Health Net") and SafeHealth Life Insurance Company ("SafeHealth") for
the transfer of your dental policy by SafeHealth. This assumption will be
effective as of 12:01 a.m. Pacific Time, on _______________, 2003.
SafeHealth Life Insurance Company is licensed to provide dental insurance
products in [STATE]. To introduce you to SafeHealth, attached is a summary of
essential information about SafeHealth.
Your rights as a policyholder and the terms of your policy will not change
as a result of the transfer. Your benefits will not change as a result of the
transfer [although Health Net's provider network will be replaced with the
provider network of SafeHealth and certain providers in the Health Net provider
network may not be available in the SafeHealth provider network]. If you accept
the transfer, SafeHealth will provide your coverage. It will have direct
responsibility for the payment of all claims and benefits and for all other
policy obligations. Health Net will no longer have any obligations to you.
You have the following options with regard to the assumption of your
policy:
Option 1. Accept the transfer of your policy from Health Net to
SafeHealth.
Option 2. Reject the proposed transfer of your policy from Health Net
to SafeHealth. If you choose this option, Health Net will
remain your insurer and you will have no rights to claim any
payments from SafeHealth[, although SafeHealth will be
administering your Health Net dental policy until your
insurance terminates, as indicated below].
Health Net and SafeHealth recommend that you choose Option 1.
If you wish to choose Option 1, simply do not return the Rejection Form and
you will automatically be deemed to have accepted this option upon _________
[date]. You should then attach the [enclosed] Certificate of Assumption [that
you will be receiving under separate cover] to your policy.
If you wish to choose Option 2, you must complete the enclosed Rejection
Form, sign it and return it within _____ days of this Notice. If you do not
return the Rejection Form within
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that time, you will be deemed to have accepted the transfer of your policy.
[You should also return the [enclosed] Certificate of Assumption.]
In considering whether to accept the assumption, please note that Health
Net intends to cease offering dental insurance as promptly as practicable after
the transfer and assumption of its dental business to SafeHealth. Rejection of
the assumption may ultimately result in termination of your coverage. [Please
also note that Health Net has contracted with SafeHealth to administer its
dental insurance policies until Health Net is able to withdraw completely from
the market. As a result, if you reject the assumption although Health Net would
remain legally responsible for its policy obligations to you, SafeHealth will be
administering your Health Net dental policy until your insurance terminates.]
The enclosed Certificate of Assumption should be attached to your policy
unless you choose to reject the assumption of your policy.
Your current and future premiums should be paid as indicated by your
premium notices.
If you have any questions about the assumption of your policy or about
SafeHealth, please feel fee to call SafeHealth at (____) ____-_____. Written
inquiries may be mailed to: SafeHealth at __________________ [address].
Sincerely,
_________________________________ _________________________________
SAFEHEALTH LIFE INSURANCE HEALTH NET LIFE INSURANCE COMPANY
COMPANY
-10-
NOTICE OF TRANSFER [OREGON]
Dear Policyholder:
Important: Please read this notice carefully. This notice affects your rights
under your insurance policy.
TRANSFER OF POLICY
SafeHealth Life Insurance Company ("SafeHealth") has agreed to replace Health
Net Life Insurance Company ("Health Net") as your insurer under [insert policy
or certificate name and number], effective as of 12:01 a.m. Pacific Time on
_______________, 2003. SafeHealth's principal place of business is
________________.
At your request, Health Net Life will furnish to you financial information
concerning both companies. This information will include the following:
(1) Ratings for the previous year, if available, from two nationally recognized
insurance rating services. If a rating of either insurance company changed
during the previous year, the ratings for the year preceding will be furnished
as well.
(2) Balance sheets for the previous year, if available, and as of the date of
the most recent quarterly statement.
(3) A copy of the Management's Discussion and Analysis that was filed as a
supplement to the previous year's annual statement.
(4) An explanation of the reason for the transfer.
You may obtain additional information concerning SafeHealth from reference
materials in your local library or by contacting the Oregon Insurance Division
at ▇▇▇ ▇▇▇▇▇▇ ▇▇. ▇▇, ▇▇▇▇ ▇▇▇-▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
SafeHealth is authorized to write this coverage in Oregon. [The Insurance
Commissioner of Oregon has reviewed the potential effect of the proposed
transaction, and has approved the transaction.]
YOUR RIGHTS
You may choose to consent to or reject the transfer of your policy to
SafeHealth. If you want your policy transferred, you may notify us in writing
by signing and returning the enclosed pre- addressed, postage-paid card or by
writing to us at:
[Insert name, address and facsimile number of contact person]
Payment of your premium to the assuming company will also constitute acceptance
of the transaction. [If premium notices are used: The first premium notice you
receive from SafeHealth, however, will provide you with a method that will allow
you to pay the premium while reserving the right to reject the transfer.] [If
premium notices are NOT used: SafeHealth will provide you with a method by which
you may pay the premium while reserving the right to reject the transfer.]
If you reject the transfer, you may keep your policy with Health Net or exercise
any option under your policy. If we do not receive a written rejection you
will, as a matter of law, have consented
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to the transfer. Before this consent is final, however, you will be provided a
second notice of the transfer twelve months from now. After the second notice is
provided you will have one month to reply. If you have paid your premium to
SafeHealth without reserving your right to reject the transfer, you will not
receive a second notice.
EFFECT OF TRANSFER
If you accept this transfer, SafeHealth will be your insurer. It will have
direct responsibility to you for the payment of all claims, benefits and for all
other policy obligations. Health Net will no longer have any obligations to
you.
If you accept this transfer, you should make all premium payments and claims
submissions to SafeHealth and direct all questions to SafeHealth.
In considering whether to accept the assumption, please note that Health Net
intends to cease offering dental insurance as promptly as practicable after the
transfer and assumption of its dental business to SafeHealth. Rejection of the
assumption may ultimately result in termination of your coverage. [Please also
note that Health Net has contracted with SafeHealth to administer its dental
insurance policies until Health Net is able to withdraw completely from the
market. As a result, if you reject the assumption although Health Net would
remain legally responsible for its policy obligations to you, SafeHealth will be
administering your Health Net dental policy until your insurance terminates.]
Sincerely,
_____________
Health Net Life Insurance Company
[Address]
[Telephone Number]
For your convenience, we have enclosed a pre-addressed postage- paid response
card. Please take time now to read the enclosed notice and complete and return
the response card to us.
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NOTICE TO GROUP MEMBERS
Health Net Life Insurance Company ("Health Net") is presently implementing
a plan that is intended to ensure uninterrupted coverage for our customers. As
part of the plan, we have entered into an agreement with SafeHealth Life
Insurance Company ("SafeHealth"), that will assume Health Net's dental insurance
business. SafeHealth will replace Health Net under your dental insurance
coverage with Health Net effective ________________, 2003.
Your rights as an insured and the terms of your certificate of coverage
will not change as a result of the transfer, except as set forth in the enclosed
Certificate of Assumption. Your benefits will not change as a result of the
transfer.
The enclosed Certificate of Assumption should be attached to your
certificate of coverage.
Assumption of your dental insurance coverage will be effective as of
____________, 2003, at 12:01 a.m. Pacific Time. If you have any questions about
the assumption of your contract or about SafeHealth, please feel fee to call
SafeHealth at (____) ____-_____. Written inquiries may be mailed to: SafeHealth
at [_____________].
Sincerely,
_________________________________ _________________________________
SAFEHEALTH LIFE INSURANCE HEALTH NET LIFE INSURANCE COMPANY
COMPANY
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CERTIFICATE OF ASSUMPTION
[Individual]
You are hereby notified that SafeHealth Life Insurance Company has,
effective as of _________, 2003 (the "Effective Time"), assumed all rights,
liabilities, and obligations of Health Net Life Insurance Company under your
dental insurance policy with Health Net Life Insurance Company.
From and after the Effective Time, all references in your policy or
certificate to "Health Net Life Insurance Company" are hereby changed to
"SafeHealth Life Insurance Company." Except for the substitution of SafeHealth
for Health Net as your insurer, your rights as a insured will not be affected by
the change in companies, and the terms and conditions of your policy or
certificate will not be changed by reason of the assumption.
All correspondence and inquiries concerning your policy or certificate,
including premium payments, policy or certificate changes, and notices of
claims, should be submitted to:
SafeHealth Life Insurance Company
[address]
This Certificate of Assumption, as of the Effective Time, forms a part of
and should be attached to the policy or certificate issued to you by Health Net
Life Insurance Company.
IN WITNESS WHEREOF, SafeHealth Life Insurance Company has caused this
Certificate of Assumption to be duly signed and issued.
---------------------------------
SafeHealth Life Insurance Company
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NOTICE OF REJECTION OF ASSUMPTION
[Arizona and California]
To: HEALTH NET LIFE INSURANCE COMPANY
REJECTION
---------
I have reviewed the Certificate of Assumption whereby SafeHealth Life
Insurance Company would assume all of the rights, liabilities, and obligations
of Health Net Life Insurance Company under my dental insurance policy or
certificate previously issued by Health Net Life Insurance Company. I have also
reviewed the Notice of Transfer describing the transaction.
I hereby notify you that I REJECT the proposed assumption of my policy or
--------
certificate and substitution of SafeHealth Life Insurance Company thereunder,
and I wish to retain my policy or certificate with Health Net Life Insurance
Company. I UNDERSTAND THAT HEALTH NET LIFE INSURANCE COMPANY INTENDS TO
DISCONTINUE ITS DENTAL INSURANCE BUSINESS AND THAT REJECTION OF THE ASSUMPTION
MAY ULTIMATELY RESULT IN TERMINATION OF MY COVERAGE.
DATE:
--------------------------------------------------
Policyholder Signature
--------------------------------------------------
Print or Type Name
--------------------------------------------------
ID # from the Health Net Life Insurance Company
Identification Card Issued to Policy Holder
-15-
RESPONSE CARD
[Oregon]
___ Yes, I accept the transfer of my policy from Health Net Life Insurance
Company to SafeHealth Life Insurance Company.
___ No, I reject the proposed transfer of my policy Health Net Life Insurance
Company to SafeHealth Life Insurance Company and wish to retain my policy Health
Net Life Insurance Company
DATE:
-------------------------------------------------------------------
Policy Holder Signature
--------------------------------------------------
Print or Type Name
--------------------------------------------------
Street Address
--------------------------------------------------
City, State, Zip
--------------------------------------------------
ID # from the Health Net Life Insurance Company
Identification Card Issued to Policy Holder
-16-
CERTIFICATE OF ASSUMPTION
[Group]
You are hereby notified that SafeHealth Life Insurance Company has,
effective as of _____________, 2003 (the "Effective Time"), assumed all rights,
liabilities, and obligations of Health Net Life Insurance Company under your
dental insurance policy with Health Net Life Insurance Company.
From and after the Effective Time, all references in your policy to "Health
Net Life Insurance Company" are hereby changed to "SafeHealth Life Insurance
Company."
All correspondence and inquiries concerning your policy, including premium
payments, policy changes, and notices of claims, should be submitted to:
SafeHealth Life Insurance Company
[address]
Except as described in this Certificate of Assumption, your rights as a
policy holder will not be affected by the change in companies, and the terms and
conditions of your policy will not be changed by reason of the assumption. This
Certificate of Assumption, as of the Effective Time, forms a part of and should
be attached to the dental insurance policy issued to you by Health Net Life
Insurance Company. Copies of this Certificate of Assumption must be distributed
to covered group members under the policy for attachment to their certificates
of coverage.
IN WITNESS WHEREOF, Health Net Life Insurance Company and SafeHealth Life
Insurance Company have caused this Certificate of Assumption to be duly signed
and issued.
--------------------------------- ---------------------------------
Health Net Life Insurance Company SafeHealth Life Insurance Company
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