Health care cooperative contracts and small-plan exemption

P/OPINION 76-05


                                                         3(1)


                     April 30, 1976



Dear           :

This is in reply to your letter dated October 7, 1975,
requesting an interpretive letter stating whether a "Group
Medical Coverage Agreement" between Group Health Cooperative
of          (Group Health) and an employer or employee
organization under which Group Health agrees to provide
specified medical services to employees or members and
their dependents constitutes a welfare benefit plan, "the
benefits of which are provided exclusively through insurance
contracts or policies issued by an insurance company or
similar organization which is qualified to do business
in any State" within the meaning of section 2520.104-20
of the regulation issued by the Department of Labor on
August 15, 1975. The basic question appears to be whether
Group Health is an "insurance or similar organization
which is qualified to do business in any State".

According to your letter, Group Health is a non-profit
corporation organized for the purpose of providing prepaid
comprehensive medical care for its subscribers and is
extensively regulated by the Insurance Commissioner of the
State of           . Prior to September 8, 1975, when
additional legislation was passed, Group Health was registered
with the Insurance Commissioner of the State of            as
a health care contractor. It will apply to the Insurance
Commissioner for registration as a health maintenance
organization as soon as procedures are developed by the
Commissioner. Group Health operates nine clinics and has
contracts with individual subscribers, group subscribers
such as employers, unions, etc. and group conversion
subscribers. Group medical coverage agreements like that
used by Group Health are considered to be a form of insurance
contract under [state] law. You cite two decisions by the
[state] Supreme Court to substantiate this.
P/OPINION 76-05

Based on the information in your letter we concur that
Group Health, registered with and supervised by the
Insurance Commissioner of the State of          , is
an organization similar to an insurance company.
Employee welfare benefit plans that enter into contracts
with Group Health to provide medical services to employees
or members of unions and their dependents may qualify for
the limited exemptions granted in section 2520.104-20
of the regulation issued August 15, 1975, provided they
meet all other requirements.

Sincerely,