EXHIBIT 10.49 TO CURRENT REPORT ON FORM 8-K DATED AS OF JUNE 30, 2003
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ASSUMPTION AND INDEMNITY REINSURANCE AGREEMENT
THIS ASSUMPTION AND INDEMNITY REINSURANCE AGREEMENT (this
"Agreement"), dated as of June 30, 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
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life 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 Vision 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 Vision 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 Vision 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 Vision 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 June 30, 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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"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 Vision Services pursuant to Vision Policies.
"Non-Novated Vision Policies" shall have the meaning set forth in Section
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2.04.
"Novated Vision Policies" means those Vision Policies transferred to the
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Reinsurer by novation as of the Novation Date and under which Vision Policies
the Reinsurer shall have become the successor to the Company under the Vision
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 Vision 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 Vision 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 Vision 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 Vision Policies;
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(d) any assessment required by any insurance guaranty, insolvency,
comprehensive health association or other similar fund maintained by
any jurisdiction relating to the Vision 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 Vision
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 Vision Services provided to Members under the
Vision 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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"Vision 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 resident or with
their principal place of business in California that obligate the Company to
provide, arrange for the provision of, or indemnify for the cost of vision care
services and vision 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, Vision Policies shall not include any policy
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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 vision care services and vision
supplies pursuant to any Government Sponsored Contracts, or 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 vision care services and vision supplies to employees
of the Company or any Affiliate of the Company.
"Vision Services" shall have the meaning set forth in Section 7.07.
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ARTICLE II
BUSINESS TRANSFERRED AND REINSURED
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Section 2.01. Assignment of Vision Policies. As of the Effective
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Time (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 Vision Policies identified in Schedule 2.01 attached hereto
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and made a part hereof and delegates to the Reinsurer all of the Company's
duties and obligations of performance and payment under the Vision 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
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to, or arising out of the Vision Policies.
Section 2.02. Novation. As soon as practicable after the
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Effective Time, the Reinsurer shall use all commercially reasonable efforts to
effect the assumption by novation by the Reinsurer of the Vision Policies (each
such Vision Policy being referred to herein as a "Novated Vision Policy" and
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Novated Vision Policies shall include any such subsequently novated Vision
Policies). If the Reinsurer does not for any reason assume by novation any
Vision Policy, then the Reinsurer shall accept and reinsure, on an indemnity
reinsurance basis, 100% of the Policy Liabilities related to such Non-Novated
Vision Policies in accordance with the terms and conditions of this Agreement.
Section 2.03. Direct Obligations. To the extent that the
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Reinsurer assumes by novation any Vision Policies under applicable Law, as of
the Novation Date (i) the Reinsurer shall be the successor to the Company under
such Novated Vision Policies as if such Novated Vision 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 Vision 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 Vision 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
Vision Policies, (iv) the Members under such Novated Vision Policies shall have
the right to file claims arising under such Novated Vision Policies directly
with the Reinsurer and shall have a direct right of action for indemnification,
benefits and services under such Novated Vision 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 Vision 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 Vision 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
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Effective Time, 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 Vision Policies (including those Vision Policies that are
identified in Schedule 2.01 attached hereto and made a part hereof)
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which the Reinsurer has not for any reason (including the lack of any required
approval or consent of a party to a Vision Policy) as of the Effective Time
assumed by novation (each such Vision Policy being referred to herein as a
"Non-Novated Vision Policy"). Notwithstanding the foregoing, the term
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"Non-Novated Vision Policy" shall not include any Vision Policy from and after
the date of its assumption by novation at any time by the Reinsurer.
Section 2.05. Policy Liabilities. The Reinsurer accepts,
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reinsures, and 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 Vision
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 Vision 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 Vision 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 Vision Policy shall take
effect until the earlier of the acceptance of the assumption by the party to a
Vision 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 Vision 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
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effect until all Policy Liabilities reinsured and assumed by Reinsurer have been
discharged in full, or all Vision Policies are transferred and assumed by the
Reinsurer by novation and all obligations of the Reinsurer hereunder have been
discharged in full.
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ARTICLE V
CONSIDERATION
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Section 5.01. Consideration to the Reinsurer. The Reinsurer shall
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be 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 Vision Policies.
In the event that the Company receives any premium or other consideration with
respect to a Vision 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 Vision 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,
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premium 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 Vision 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 Vision 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, 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 Vision 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 Vision
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Policies. As additional consideration for the assumption by novation by
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Reinsurer of the Novated Vision Policies, the Company shall (i) transfer to
Reinsurer 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,
loss, and loss adjustment expense (including losses that have been incurred but
not reported) reserve, if any, attributable to claims arising under the Novated
Vision 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 Vision Policies assumed by the Reinsurer under this
Agreement.
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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 Vision 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 or other amounts due
with respect to the Non-Novated Vision 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 Vision 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
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delivery of 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
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by 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
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amount 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
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received 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.
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Section 6.07. Reports to Regulatory Authorities. During the term of
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this 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 Vision 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 Vision Policies.
ARTICLE VII
VISION POLICY ADMINISTRATION; REPORTING
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Section 7.01. Administration of Non-Novated Vision Policies. The
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Company hereby grants the Reinsurer authority in all matters relating to
administration of the Non-Novated Vision 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 Vision Policies, with full
power and authority to act in the name, place and stead of the Company with
respect to the Non-Novated Vision Policies. Without limiting the foregoing, the
Reinsurer shall provide reasonable advance notice to the Company of its intent
to cancel specific Non-Novated Vision Policies for non-payment of premium.
Unless the Company objects to the proposed cancellations within five calendar
days of receipt of the notice from the Reinsurer, the Reinsurer shall have the
right to cancel the referenced Non-Novated Vision Policies on behalf of the
Company for non-payment of premium in a manner consistent with applicable Law.
If the Company objects to the proposed cancellation of any Non-Novated Vision
Policy for non-payment of premium, the Company shall indemnify the Reinsurer for
any unpaid premium with respect to any such policy until such policy is
cancelled.
Section 7.02. Administration. The Reinsurer shall, at its expense,
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provide the technical and administrative service, assistance and support
functions described in Schedule 7.02 attached hereto (the "Services") reasonably
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necessary or appropriate for the proper management and administration of the
Non-Novated Vision Policies, which shall include, but not be limited to,
Services required for the proper administration of the Non-Novated Vision
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
Law, 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
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cost shall administer and process all payments to reimburse providers and
Members for covered Vision Services under the Non-Novated Vision Policies (the
"Claims") in conformance with the Company's prevailing practices and procedures
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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
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foregoing Vision 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 Vision 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 of counsel. The Company shall apprise
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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
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if the Company receives an 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 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 Vision 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 Vision 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
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cooperate with each other in providing information necessary to respond to any
inquiries and complaints concerning the Non-Novated Vision Policies. All
inquiries and complaints concerning the Non-Novated Vision 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 Vision 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
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Company shall 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
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receives an offer of settlement or compromise from the other
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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 Vision
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 all
reports and filings with respect to the Non-Novated Vision Policies required to
be made with any Governmental Authority.
Section 7.07. Provider Services. In fulfilling its Obligations
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pursuant to Section 2.01, the Reinsurer shall provide, arrange for the provision
of, or indemnify for the cost of vision care services and supplies ("Vision
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Services") required to satisfy all obligations with respect to the provision of
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Vision Services to Members and their dependents under the Non-Novated Vision
Policies. The Reinsurer shall be responsible for the recruitment, credentialing
and management of, and for contracting with, or gaining access to vision care
and service providers adequate for the delivery of all Vision Services to
Members required by or incidental to the Non-Novated Vision Policies.
Section 7.08. Administration of Novated Vision Policies. Except for
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those services to be provided to the Reinsurer by the Company pursuant to the
Transition Services Agreement, administration and servicing of the Novated
Vision Policies shall be the sole responsibility of the Reinsurer.
Section 7.09. Communications Relating to Novated Vision Policies. On
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and 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 Vision 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
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the end of each month after the Effective Time, beginning with the month in
which the first novation of an Vision Policy occurs, the Reinsurer shall provide
to the Company a report indicating all Vision 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
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authorized representatives shall have the right, upon prior written notice, at
reasonable times during normal business hours,
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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, 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
----------------
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
---------------
Section 9.01. Indemnification by the Reinsurer. The Reinsurer shall
----------------------------------
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 Vision Policy, the Reinsurer hereby agrees that all amounts due
under this Agreement with respect to the Non-Novated Vision 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
-11-
made directly to the Company or to its conservator, liquidator, or statutory
successor, except where the Non-Novated Vision 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 Vision 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.
Section 10.03. Novated Vision Policies. All amounts due a Member under
-----------------------
the Novated Vision Policies shall be payable by the Reinsurer on the basis of
the liability of the Reinsurer under the Novated Vision Policies, without
diminution because of the insolvency of the Company. Any benefits or amounts
due to Members with respect to a Novated Vision Policy shall be paid or
performed by the Reinsurer in accordance with the Novated Vision 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 vision HMO or vision indemnity insurance business. If a JAMS
arbitrator with specific experience in the vision HMO or vision 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.
-12-
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.
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.
00 Xxxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxx X. Xxxxxxx
President and Chief Executive Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
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with a copy to:
Xxxxxx X. Xxxxxxxx
Senior Vice President and General Counsel
SafeGuard Health Enterprises, Inc.
00 Xxxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
and
Xxxxx X. Xxxxxxxxx
Xxxxxxxxxxx and Price, LLP
000 Xxxx Xxxxxx, Xxx. 0000
Xxxxxx, Xxxxx 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Company:
Health Net, Inc.
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Xxxxxxxxx: (000) 000-0000
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
-14-
the Parties with respect to the transactions contemplated hereby, and supersedes
all prior agreements and understandings, written or oral, with respect thereto.
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.
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 Vision 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 Law of the State of California.
-15-
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.
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
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxx
President and Chief Executive Officer
HEALTH NET LIFE INSURANCE COMPANY
By: /s/ Xxxxxxx Xxxx
-----------------------------------------
Xxxxxxx Xxxx
President
-16-
SCHEDULE 2.01
HEALTH NET LIFE INSURANCE COMPANY
VISION POLICIES
The Vision Policies identified by group and individual contract number and name:
To be determined as of the Effective Time
-17-
SCHEDULE 7.02
SERVICES
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 Vision Policies, all
services reasonably necessary for, and incident to the proper management and
administration of, the Non-Novated Vision Policies, including but not limited to
the following services:
A. All Member services relating to the Non-Novated Vision Policies including
the following:
1. Billing and collection of premiums for Non-Novated Vision Policies
that are not issued to an individual, employer or other group sponsor
together with a medical product of the Company or any Affiliate of the
Company;
2. Setting renewal rates in a manner consistent with the rates and rating
plans filed by the Company with applicable Governmental Authorities;
3. Process and payment of claims;
4. Handle Member service requests (including adding new Members to group
Vision Policies, deleting Members from group Vision Policies),
administration of COBRA responsibilities, inquiries and complaints
relating to the Non-Novated Vision Policies;
5. Preparation and mailing of premium notices on a timely basis to
Members and parties to the Non-Novated Vision Policies; transmission
of additional premium notices, lapse notices, reinstatement offers and
other notices to Members and parties to Vision Policies;
6. Underwriting and processing of any and all policy changes and
reinstatements;
7. Member mailings of any necessary endorsements or other contract
documents;
8. 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;
9. Administration of any agreement providing for the payment of
commissions relating to any Non-Novated Vision Policy;
10. Development, as necessary, and maintenance of computer systems
required to provide the Services.
-18-
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.
-19-
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.
-20-
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.
-21-
3. Permitted Uses and Disclosures by Business Associate General Use and
Disclosure Provisions
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.
-22-
(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. 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.
-23-
(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.
(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.
-24-
EXHIBIT A
---------
TO ASSUMPTION AND
INDEMNITY REINSURANCE
AGREEMENT
MEMBER MATERIALS
NOTICE OF TRANSFER (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 vision policy from Health Net to SafeHealth. This
assumption will be effective as of 12:01 a.m. Pacific Time, on _______________,
2003.
SafeHealth Life Insurance Company is licensed to provide vision insurance
products in California. 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 vision 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.
-25-
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 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 vision insurance as promptly as practicable after
the transfer of its vision 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 vision 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 vision 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 (000) 000-0000. Written
inquiries may be mailed to: SafeHealth at 00 Xxxxxxxxxx, Xxxxx 000, Xxxxx Xxxxx,
Xxxxxxxxxx 00000-0000.
Sincerely,
_________________________________ _________________________________
SAFEHEALTH LIFE INSURANCE HEALTH NET LIFE INSURANCE COMPANY
COMPANY
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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 vision insurance
business. SafeHealth will replace Health Net under your vision 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 vision 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 (000) 000-0000. Written inquiries may be mailed to: SafeHealth at
00 Xxxxxxxxxx, Xxxxx 000, Xxxxx Xxxxx, Xxxxxxxxxx 00000-0000.
Sincerely,
_________________________________ _________________________________
SAFEHEALTH LIFE INSURANCE HEALTH NET LIFE INSURANCE COMPANY
COMPANY
-27-
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
vision 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
00 Xxxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000-0000
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
-28-
NOTICE OF REJECTION OF ASSUMPTION
[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 vision 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 VISION 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
-29-
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
vision 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
00 Xxxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxxxxx 00000-0000
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 vision 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
-30-
