BLUE CROSS LICENSE AGREEMENT
This agreement by and between Blue Cross and Blue Shield Association
("BCBSA") and The Blue Cross Plan, known as ________________ (the "Plan").
Preamble
WHEREAS, the Plan and/or its predecessor(s) in interest
(collectively the "Plan") had the right to use the BLUE CROSS and BLUE CROSS
Design service marks (collectively the "Licensed Marks") for health care plans
in its service area, which was essentially local in nature;
WHEREAS, the Plan was desirous of assuring nationwide protection of
the Licensed Marks, maintaining uniform quality controls among Plans,
facilitating the provision of cost effective health care services to the public
and otherwise benefiting the public;
WHEREAS, to better attain such ends, the Plan and the predecessor of
BCBSA in 1972 simultaneously executed the BCA License Agreement (s) and the
Ownership Agreement; and
WHEREAS, BCBSA and the Plan desire to supercede said Agreement(s) to
reflect their current practices and to assure the continued integrity of the
Licensed Marks and of the BLUE CROSS system;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
Agreement
1. BCBSA hereby grants to the Plan, upon the terms and conditions of
this License Agreement, the right to use BLUE CROSS in its trade and/or
corporate name (the "Licensed Name"), and the right to use the Licensed Marks,
in the sale, marketing and administration of health care plans and related
services in the Service Area set forth and defined in paragraph 5 below. As used
herein, health care plans and related services shall include acting as a
nonprofit health care plan, a for-profit health care plan, or mutual health
insurer operating on a not-for-profit or for-profit basis, under state law;
financing access to health care services; providing health care management and
administration; administering, but not underwriting, non-health portions of
Worker's Compensation insurance; and delivering health care services.
2. The Plan may use the Licensed Marks and Name in connection with
the offering of: a) health care plans and related services in the Service Area
through Controlled Affiliates, provided that each such affiliate is separately
licensed to use the Licensed Marks and Name under the terms and conditions
contained in the Agreement attached as Exhibit 1 hereto (the "Controlled
Affiliate License Agreement"); and: b) insurance coverages offered by life
insurers under the applicable law in the Service Area, other than those which
the Plan may offer in its own name, provided through Controlled Affiliates,
provided that each such affiliate is separately licensed to use the Licensed
Marks and Name under the terms and conditions contained in the Agreement
attached as Exhibit 1A hereto (the "Controlled Affiliate License Agreement
Applicable to Life Insurance Companies") and further provided that the offering
of such services does not and will not dilute or tarnish the unique value of the
Licensed Marks and Name; and c) administration and underwriting of Workers'
Compensation Insurance Controlled Affiliates, provided that each such Affiliate
is separately licensed to use the Licensed Marks and Name under the terms and
conditions contained in the Agreement attached as Exhibit 1 hereto (the
"Controlled Affiliate License.") With respect to any HMO previously sublicensed
as provided in a License Addendum between BCBSA and the Plan, the Plan shall
have one (1) year from the date hereof to obtain execution of the direct license
required herein. As used herein, a Controlled Affiliate is defined as an entity
organized and operated in such a manner that it is subject to the bona fide
control of a Plan or Plans. Absent written approval by BCBSA of an alternative
method of control, bona fide control shall mean:
A. The legal authority, directly or indirectly through
wholly-owned subsidiaries: (a) to select members of
the Controlled Affiliate's governing body having not
less than 51% voting control thereof; (b) to exercise
operational control with respect to the governance
thereof; and (c) to prevent any change in its articles
of incorporation, bylaws or other governing documents
deemed inappropriate. In addition, a Plan or Plans
shall own at least 51% of any for-profit Controlled
Affiliate; or
B. The legal authority directly or indirectly through
wholly-owned subsidiaries (a) to select members of the
Affiliate's governing body having not less than 50%
voting control; (b) the legal ability to prevent any
change in the articles of incorporation, bylaws or
other establishing or governing documents of the
Affiliate with which it does not concur; (c) at least
equal control over the operations of the Affiliate;
and (d) to concur before the Affiliate can:
Amended as of November 16, 1995
-2-
1. Change its legal and/or trade name;
2. Change the geographic area in which it operates;
3. Change the types of businesses in which it engages;
4. Take any action that Plan or BCBSA reasonably believes will adversely affect
the Licensed Marks or Names.
Amended as of November 17, 1994
-2a-
3. The Plan may engage in activities not required by BCBSA to be
directly licensed through Controlled Affiliates and may indicate its
relationship thereto by use of the Licensed Name as a tag line, provided that
the engaging in such activities does not and will not dilute or tarnish the
unique value of the Licensed Marks and Name and further provided that such tag
line use is not in a manner likely to cause confusion or mistake. Consistent
with the avoidance of confusion or mistake, each tag line use of the Plan's
Licensed Name: (a) shall be in the style and manner specified by BCBSA from
time-to-time; (b) shall not include the design service marks; (c) shall not be
in a manner to import more than the Plan's mere ownership of the affiliate; and
(d) shall be restricted to the Service Area. No rights are hereby created in any
Controlled Affiliate to use the Licensed Name in its own name or otherwise. At
least annually, the Plan shall provide BCBSA with representative samples of each
such use of its Licensed Name pursuant to the foregoing conditions.
4. The Plan recognizes the importance of a comprehensive national
network of independent BCBSA licensees which are committed to strengthening the
Licensed Marks and Name. The Plan further recognizes that its actions within its
Service Area may affect the value of the Licensed Marks and Name nationwide. The
Plan agrees (a) to maintain in good standing its membership in BCBSA; (b)
promptly to pay its dues to BCBSA, said dues to represent the royalties for this
License Agreement; (c) materially to comply with all applicable laws; (d) to
comply with the Membership Standards of BCBSA, a current copy of which is
attached as Exhibit 2 hereto; and (e) reasonably to permit BCBSA, upon a
written, good faith request and during reasonable business hours, to inspect the
Plan's books and records necessary to ascertain compliance herewith. As to other
Plans and third parties, BCBSA shall maintain the confidentiality of all
documents and information furnished by the Plan pursuant hereto, or pursuant to
the Membership Standards, and clearly designated by the Plan as containing
proprietary information of the Plan.
5. The rights hereby granted are exclusive to the Plan within the
geographical area(s) served by the Plan on June 30, 1972, and/or as to which the
Plan has been granted a subsequent license, which is hereby defined as the
"Service Area," except that BCBSA reserves the right to use the Licensed Marks
in said Service Area, and except to the extent that said Service Area may
overlap areas served by one or more other licensed Blue Shield Plans as of said
date or subsequent license, as to which overlapping areas the rights hereby
granted are nonexclusive as to such other Plan or Plans only.
Amended as of September 19, 1996
-3-
6. Except as expressly provided by BCBSA with respect to National
Accounts, Government Programs and certain other necessary and collateral uses,
the current rules and regulations governing which are attached as Exhibit 3 and
Exhibit 4 hereto, or as expressly provided herein, the Plan may not use the
Licensed Marks and Name outside the Service Area or in connection with other
goods and services, nor may the Plan use the Licensed Marks or Name in a manner
which is intended to transfer in the Service Area the goodwill associated
therewith to another ▇▇▇▇ or name. Nothing herein shall be construed to prevent
the Plan from engaging in lawful activity anywhere under other marks and names
not confusingly similar to the Licensed Marks and Name, provided that engaging
in such activity does and will not dilute or tarnish the unique value of the
Licensed Marks and Name.
7. The Plan agrees that it will display the Licensed Marks and Name
only in such form, style and manner as shall be specifically prescribed by BCBSA
from time-to-time in regulations of general application in order to prevent
impairment of the distinctiveness of the Licensed Marks and Name and the
goodwill pertaining thereto. The Plan shall cause to appear on all materials on
or in connection with which the Licensed Marks or Name are used such legends,
markings and notices as BCBSA may reasonably request in order to give
appropriate notice of service ▇▇▇▇ or other proprietary rights therein or
pertaining thereto.
8. BCBSA agrees that: (a) it will not grant any other license
effective during the term of this License Agreement for the use of the Licensed
Marks or Name which is inconsistent with the rights granted to the Plan
hereunder; and (b) it will not itself use the Licensed Marks in derogation of
the rights of the Plan or in a manner to deprive the Plan of the full benefits
of this License Agreement. The Plan agrees that it will not attack the title of
BCBSA in and to the Licensed Marks or Name or attack the validity of the
Licensed Marks or of this License Agreement. The Plan further agrees that all
use by it of the Licensed Marks and Name or any similar ▇▇▇▇ or name shall inure
to the benefit of BCBSA, and the Plan shall cooperate with BCBSA in effectuating
the assignment to BCBSA of any service ▇▇▇▇ or trademark registrations of the
Licensed Marks or any similar ▇▇▇▇ or name held by the Plan or a Controlled
Affiliate of the Plan, all or any portion of which registration consists of the
Licensed Marks.
-4-
9. (a). Should the Plan fail to comply with the provisions of
paragraphs 2-4, 6, 7 and/or 12, and not cure such failure within thirty (30)
days of receiving written notice thereof (or commence curing such failure within
such thirty day period and continue diligent efforts to complete the curing of
such failure if such curing cannot reasonably be completed within such thirty
day period), BCBSA shall have the right to issue a notice that the Plan is in a
state of noncompliance. Except as to the termination of a Plan's License
Agreement or the merger of two or more Plans, disputes as to noncompliance, and
all other disputes between or among BCBSA, the Plan, other Plans and/or
Controlled Affiliates, shall be submitted promptly to mediation and mandatory
dispute resolution pursuant to the rules and regulations of BCBSA, a current
copy of which is attached as Exhibit 5 hereto, and shall be timely presented and
resolved. The mandatory dispute resolution panel shall have authority to issue
orders for specific performance and assess monetary penalties. If a state of
noncompliance as aforesaid is undisputed by the Plan or is found to exist by a
mandatory dispute resolution panel and is uncured as provided above, BCBSA shall
have the right to seek judicial enforcement of the License Agreement and/or to
issue a notice of termination thereof. Except, however, as provided in paragraph
15(a)(i)-(viii) below, no Plan's license to use the Licensed Marks and Name may
be finally terminated for any reason without the affirmative vote of
three-fourths of the Plans and three-fourths of the total then current weighted
vote of all the Plans.
(b). Notwithstandng any other provision of this
License Agreement, a Plan's license to use the Licensed Marks and Name may be
forthwith terminated by the affirmative vote of three-fourths of the Plans and
three-fourths of the total then current weighted vote of all the Plans at a
special meeting expressly called by BCBSA for the purpose on ten (10) days
written notice for: (i) failure to comply with any minimum capital or liquidity
requirement under the Membership Standard on Financial Responsibility; or (ii)
impending financial insolvency; or (iii) such other reason as is determined in
good faith immediately and irreparably to threaten the integrity and reputation
of BCBSA, the Plans and/or the Licensed Marks.
(c). To the extent not otherwise provided therein,
neither: (i) the Membership Standards; nor (ii) the rules and regulations
governing National Accounts, Government Programs and certain other uses; nor
(iii) the rules and regulations governing mediation and mandatory dispute
resolution, may be amended unless and until each such amendment is first adopted
by the affirmative vote of three-fourths of the Plans and of three-fourths of
the total then current weighted vote of all the Plans.
Amended as of November 17, 1994
-5-
9. (d). The Plan may operate as a for-profit company on the
following conditions:
(i) The Plan shall discharge all responsibilities which it has to
the Association and to other Plans by virtue of this Agreement and the Plan's
membership in BCBSA.
(ii) The Plan shall not use the licensed Marks and Name, or any
derivative thereof, as part of its legal name or any symbol used to identify the
Plan in any securities market. The Plan shall use the licensed Marks and Name as
part of its trade name within its service area for the sale, marketing and
administration of health care and related services in the service area.
(iii) The Plan's license to use the Licensed Marks and Name shall
automatically terminate effective ten business days after: (a) any Person,
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of securities representing 20% or more of the voting power of
the Plan, unless such Person shall cease to be such a Beneficial Owner prior to
such automatic termination becoming effective; (b) individuals who at the time
the Plan went public constituted the Board of Directors of the Plan (together
with any new directors whose election to the Board was approved by a vote of 2/3
of the directors then still in office who were directors at the time the Plan
went public or whose election or nomination was previously so approved) (the
"Continuing Directors") cease for any reason to constitute a majority of the
Board of Directors; or (c) the Plan consolidates with or merges with or into any
person or conveys, assigns, transfers or sells all or substantially all of its
assets to any person other than a merger in which the Plan is the surviving
entity and immediately after which merger, no person or group beneficially owns
securities representing 20% or more of the voting power of the Plan: provided
that, if requested by the affected Plan prior to such automatic termination
becoming effective, the provisions of this paragraph 9(d)(iii) may be waived or
made conditional, in whole or in part, upon the affirmative vote of a majority
of the disinterested Plans and a majority of the total then current weighted
vote of the disinterested Plans.
In the event that the Plan's license to use the Licensed Marks and Name is
terminated pursuant to this Paragraph 9(d)(iii), the license may be reinstated
by BCBSA if, within 30 days of the date of such termination, the Plan
demonstrates that the Person referred to in the preceding sentence is no longer
the Beneficial Owner of securities representing 20% or more of the voting power
of the Plan.
Amended as of September 29, 1994
-5a-
The Plan's license to use the Licensed Marks and Name may be terminated if any
Person, together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of securities representing 5% or more of the voting power of
the Plan and such Person's Beneficial Ownership is deemed in BCBSA's absolute
discretion, detrimental to the best interest of the Name and Marks; provided,
however that such termination shall become effective only upon the affirmative
vote of three-fourths of the disinterested Plans and three-fourths of the total
then current weighted vote of the disinterested Plans.
(iv) For purposes of paragraph 9(d)(iii), the following definitions
shall apply:
(a) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended and in
effect on November 17, 1993 (the "Exchange Act").
(b) A Person shall be deemed the "Beneficial Owner" of
and shall be deemed to "beneficially own" any
securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly
or indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to
acquire (whether such right is exercisable
immediately or only after the passage of time)
pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion
rights, exchange rights, warrants or options, or
otherwise; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or
understanding to vote such security (1) arises
solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance
with, the applicable rules and regulations
promulgated under the Exchange Act and (2) is not
also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person (or any of
such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (other than
customary agreements with and between
Amended as of September 29, 1994
-5b-
underwriters and selling group members with respect
to a bona fide public offering of securities)
relating to the acquisition, holding, voting (except
to the extent contemplated by the proviso to
(b)(ii)(B) above) or disposing of any securities of
the Plan.
Notwithstanding anything in this definition of
Beneficial Ownership to the contrary, the phrase
"then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the
Plan, shall mean the number of such securities then
issued and outstanding together with the number of
such securities not then actually issued and
outstanding which such Person would be deemed to own
beneficially hereunder.
(c) "Person" shall mean any individual, firm,
partnership, corporation, trust, association, joint
venture or other entity, and shall include any
successor (by merger or otherwise) or such entity.
Amended as of September 29, 1994
-5c-
10. This License Agreement shall remain in effect: (a) until
terminated as provided herein; or (b) until this and all such other License
Agreements are terminated by the affirmative vote of three-fourths of the Plans
and three-fourths of the total then current weighted vote of all the Plans; or
(c) until termination of the aforesaid Ownership Agreement; or (d) until
terminated by the Plan upon six (6) months written notice to BCBSA.
11. Except as otherwise provided in paragraph 15 below or by the
affirmative vote of three-fourths of the Plans and three-fourths of the total
then current weighted vote of all the Plans, or unless this and all such other
License Agreements are simultaneously terminated by force of law, the
termination of this License Agreement for any reason whatsoever shall cause the
reversion to BCBSA of all rights in and to the Licensed Marks and Name, and the
Plan agrees that it will promptly discontinue all use of the Licensed Marks and
Name, will not use them thereafter, and will promptly, upon written notice from
BCBSA, change its corporate name so as to eliminate the Licensed Name therefrom.
12. The license hereby granted to Plan to use the Licensed Marks and
Name is and shall be personal to the Plan so licensed and shall not be
assignable by any act of the Plan, directly or indirectly, without the written
consent of BCBSA. Said license shall not be assignable by operation of law, nor
shall Plan mortgage or part with possession or control of this license or any
right hereunder, and the Plan shall have no right to grant any sublicense to use
the Licensed Marks and Name.
13. BCBSA shall maintain appropriate service ▇▇▇▇ registrations of
the Licensed Marks and BCBSA shall take such lawful steps and proceedings as may
be necessary or proper to prevent use of the Licensed Marks by any person who is
not authorized to use the same. Any actions or proceedings undertaken by BCBSA
under the provisions of this paragraph shall be at BCBSA's sole cost and
expense. BCBSA shall have the sole right to determine whether or not any legal
action shall be taken on account of unauthorized use of the Licensed Marks, such
right not to be unreasonably exercised. The Plan shall report any unlawful usage
of the Licensed Marks to BCBSA in writing and agrees, free of charge, to
cooperate fully with BCBSA's program of enforcing and protecting the service
▇▇▇▇ rights, trade name rights and other rights in the Licensed Marks.
-6-
14. The Plan hereby agrees to save, defend, indemnify and hold BCBSA
and any other Plan(s) harmless from and against all claims, damages, liabilities
and costs of every kind, nature and description which may arise exclusively and
directly as a result of the activities of the Plan. BCBSA hereby agrees to save,
defend, indemnify and hold the Plan and any other Plan(s) harmless from and
against all claims, damages, liabilities and costs of every kind, nature and
description which may arise exclusively and directly as a result of the
activities of BCBSA.
15. (a). This Agreement shall automatically terminate upon the
occurrence of any of the following events: (i) a voluntary petition shall be
filed by the Plan or by BCBSA seeking bankruptcy, reorganization, arrangement
with creditors or other relief under the bankruptcy laws of the United States or
any other law governing insolvency or debtor relief, or (ii) an involuntary
petition or proceeding shall be filed against the Plan or BCBSA seeking
bankruptcy, reorganization, arrangement with creditors or other relief under the
bankruptcy laws of the United States or any other law governing insolvency or
debtor relief and such petition or proceeding is consented to or acquiesced in
by the Plan or BCBSA or is not dismissed within sixty (60) days of the date upon
which the petition or other document commencing the proceeding is served upon
the Plan or BCBSA respectively, or(iii) an order for relief is entered against
the Plan or BCBSA in any case under the bankruptcy laws of the United States, or
the Plan or BCBSA is adjudged bankrupt or insolvent (as that term is defined in
the Uniform Commercial Code as enacted in the state of Illinois) by any court of
competent jurisdiction, or (iv) the Plan or BCBSA makes a general assignment of
its assets for the benefit of creditors, or (v) the Department of Insurance or
other regulatory agency assumes control of the Plan or delinquency proceedings
(voluntary or involuntary) are instituted, or (vi) an action is brought by the
Plan or BCBSA seeking its dissolution or liquidation of its assets or seeking
the appointment of a trustee, interim trustee, receiver or other custodian for
any of its property or business, or (vii) an action is instituted against the
Plan or BCBSA seeking its dissolution or liquidation of its assets or seeking
appointment of a trustee, interim trustee, receiver or other custodian for any
of its property or business and such action is consented to or acquiesced in by
the Plan or BCBSA or is not dismissed within sixty (60) days of the date upon
which the pleading or other document commencing the action is served upon the
Plan or BCBSA respectively, or(viii) a trustee, interim trustee, receiver or
other custodian for any of the Plan's or BCBSA's property or business is
appointed, or (ix) the Plan shall fail to pay its dues and shall not cure such
failure within thirty (30) days of receiving written notice thereof.
Amended November 21, 1996
-7-
(b). BCBSA, or the Plans (as provided and in addition to the rights
conferred in Paragraph 10(b) above), may terminate this Agreement immediately
upon written notice upon the occurrence of either of the following events: (a)
the Plan or BCBSA becomes insolvent (as that term is defined in the Uniform
Commercial Code enacted in the state of Illinois), or (b) any final judgment
against the Plan or BCBSA remains unsatisfied or unbonded of record for a period
of sixty (60) days or longer.
(c). If this License Agreement is terminated as to BCBSA for any
reason stated in subparagraphs 15(a) and (b) above, the ownership of the
Licensed Marks shall revert to each of the Plans as provided in the Ownership
Agreement.
(d). Upon termination of this License Agreement or any Controlled
Affiliate License Agreement of a Larger Affiliate, as defined in Exhibit 1 to
this License Agreement:
(i) The terminated entity shall send
a notice through the U.S. mails,
with first class postage affixed,
to all individual and group
customers, providers, brokers and
agents of products or services
sold, marketed, underwritten or
administered by the terminated
entity or its Controlled
Affiliates under the Licensed
Marks and Name. The form and
content of the notice shall be
specified by BCBSA and shall, at
a minimum, notify the recipient
of the termination of the
license, the consequences
thereof, and instructions for
obtaining alternate products or
services licensed by BCBSA. This
notice shall be mailed within 15
days after termination or, if
termination is pursuant to
paragraph 10(d) of this
Agreement, within 15 days after
the written notice to BCBSA
described in paragraph 10(d).
(ii) The terminated entity shall
deliver to BCBSA within five days
of a request by BCBSA a listing
of national accounts in which the
terminated entity is involved (in
a Control, Participating or
Servicing capacity), identifying
the national account and the
terminated entity's role therein.
For those accounts where the
terminated entity is the Control
Plan, the Plan must also indicate
the Participating and Servicing
Plans in the national account
syndicate.
Amended as of September 19, 1996
-8-
(iii) Unless the cause of termination
is an event stated in paragraph
15(a) or (b) above respecting
BCBSA, the Plan and its Licensed
Controlled Affiliates shall be
jointly liable for payment to
BCBSA of an amount equal to $25
multiplied by the number of
Licensed Enrollees of the
terminated entity and its
Licensed Controlled Affiliates;
provided that if any other Plan
is permitted by BCBSA to use
marks or names licensed by BCBSA
in the Service Area established
by this Agreement, the payment
shall be multiplied by a
fraction, the numerator of which
is the number of Licensed
Enrollees of the terminated
entity and its Licensed
Controlled Affiliates and the
denominator of which is the total
number of Licensed Enrollees in
the Service Area. Licensed
Enrollee means each and every
person and covered dependent who
is enrolled as an individual or
member of a group receiving
products or services sold,
marketed or administered under
marks or names licensed by BCBSA
as determined at the earlier of
(a) the end of the last fiscal
year of the terminated entity
which ended prior to termination
or (b) the fiscal year which
ended before any transactions
causing the termination began.
Notwithstanding the foregoing,
the amount payable pursuant to
this subparagraph (d)(iii) shall
be due only to the extent that,
in BCBSA's opinion, it does not
cause the net worth of the Plan
to fall below 100% of the capital
benchmark formula or its
equivalent under any successor
formula, as set forth in the
applicable financial
responsibility standards
established by BCBSA, measured as
of the date of termination and
adjusted for the value of any
transactions not made in the
ordinary course of business.
(iv) BCBSA shall have the right to
audit the books and records of
the terminated entity and its
Licensed Controlled Affiliates to
verify compliance with this
paragraph 15(d).
Amended as of September 19, 1996
-8a-
(v) As to a breach of 15 (d) (i),
(ii), (iii) or (iv), the parties
agree that the obligations are
immediately enforceable in a
court of competent jurisdiction.
As to a breach of 15 (d) (i),
(ii) or (iv) by the Plan, the
parties agree there is no
adequate remedy at law and BCBSA
is entitled to obtain specific
performance.
(e). BCBSA shall be entitled to enjoin the Plan or any related
party in a court of competent jurisdiction from entry into any transaction which
would result in a termination of this License Agreement unless the License
Agreement has been terminated pursuant to paragraph 10 (d) of this Agreement
upon the required six (6) month written notice.
(f). BCBSA acknowledges that it is not the owner
of assets of the Plan.
16. This Agreement supersedes any and all other agreements between
the parties with respect to the subject matter herein, and contains all of the
covenants and agreements of the parties as to the licensing of the Licensed
Marks and Name. This Agreement may be amended only by a signed writing, the form
of which shall have been approved by the affirmative vote of three-fourths of
the Plans and three-fourths of the total then current weighted vote of all the
Plans.
17. If any provision or any part of any provision of this Agreement
is judicially declared unlawful, each and every other provision, or any part of
any provision, shall continue in full force and effect notwithstanding such
judicial declaration.
18. No waiver by BCBSA or the Plan of any breach or default in
performance on the part of BCBSA or the Plan or any other licensee of any of the
terms, covenants or conditions of this Agreement shall constitute a waiver of
any subsequent breach or default in performance of said terms, covenants or
conditions.
19. All notices provided for hereunder shall be in writing and shall
be sent in duplicate by regular mail to BCBSA or the Plan at the address
currently published for each by BCBSA and shall be marked respectively to the
attention of the President and, if any, the General Counsel, of BCBSA or the
Plan.
Amended as of September 19, 1996
-8b-
20. Nothing herein contained shall be construed to constitute the
parties hereto as partners or joint venturers, or either as the agent of the
other, and Plan shall have no right to bind or obligate BCBSA in any way, nor
shall it represent that it has any right to do so. BCBSA shall have no liability
to third parties with respect to any aspect of the business, activities,
operations, products, or services of the Plan.
21. This Agreement shall be governed, construed and interpreted in
accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this License Agreement to be
executed, effective as of the date of last signature written below.
BLUE CROSS AND BLUE SHIELD ASSOCIATION
By____________________________________
Title_________________________________
Date__________________________________
______________________________________
By____________________________________
Title_________________________________
Date__________________________________
-9-
EXHIBIT 1
BLUE CROSS
AFFILIATE LICENSE AGREEMENT
This Agreement by and among Blue Cross and Blue Shield Association
("BCBSA") and __________________ ("Affiliate"), an affiliate of the Blue Cross
Plan(s), known as _______________________ ("Plan"), which is also a Party
signatory hereto.
WHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design
service marks;
WHEREAS, Plan and Affiliate desire that the latter be entitled to
use the BLUE CROSS and BLUE CROSS Design service marks (collectively the
"Licensed Marks") as service marks and be entitled to use the term BLUE CROSS in
a trade name ("Licensed Name");
NOW THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, BCBSA hereby
grants to Affiliate the right to use the Licensed Marks and Name in connection
with, and only in connection with: (i) health care plans and related services
and administering the non-health portion of workers' compensation insurance, and
(ii) underwriting the indemnity portion of workers' compensation insurance,
provided that Affiliate's total premium revenue comprises less than 15 percent
of the sponsoring Plan's net subscription revenue.
This grant of rights is non-exclusive and is limited to the Service Area served
by the Plan. Affiliate may not use the Licensed Marks and Name in its legal name
and may use the Licensed Marks and Name in its Trade Name only with the prior
consent of BCBSA.
2. QUALITY CONTROL
A. Affiliate agrees to use the Licensed Marks and Name only in
connection with the licensed services and further agrees to be bound by the
conditions regarding quality control shown in attached Exhibit A as they may be
amended by BCBSA from time-to-time.
B. Affiliate agrees to comply with all applicable federal, state and
local laws.
C. Affiliate agrees that it will provide on an annual basis (or more
often if reasonably required by Plan or by BCBSA) a report or reports to Plan
and BCBSA demonstrating Affiliate's compliance with the requirements of this
Agreement including but not limited to the quality control provisions of this
paragraph and the attached Exhibit A.
D. Affiliate agrees that Plan and/or BCBSA may, from time-to-time,
upon reasonable notice, review and inspect the manner and method of Affiliate's
rendering of service and use of the Licensed Marks and Name.
E. As used herein, an Affiliate is defined as an entity organized
and operated in such a manner, that it meets the following requirements:
(1) If the Plan has 50 percent of the voting control of the Affiliate:
(a) the Plan must have the legal ability to prevent any change in
the articles of incorporation, bylaws or other establishing or
governing documents of the Affiliate with which it does not concur;
(b) the Plan must have at least equal control over the operations
of the Affiliate;
(c) the Plan must concur in writing before the Affiliate can:
(i) change its legal and/or trade names;
(ii) change the geographic area in which it
operates;
(iii) change the fundamental type(s) of business
in which it engages;
(iv) take any action that Plan or BCBSA
reasonably believes will adversely affect
the Licensed Marks and Name.
(2) If the Plan has more than 50 percent voting control of the
Affiliate:
(a) the Plan must have the legal ability to prevent any change in
the articles of incorporation, bylaws or other establishing or governing
documents of the Affiliate with which it does not concur;
(b) the Plan must have control over the policy and operations of the
Affiliate.
3. SERVICE ▇▇▇▇ USE
A. Affiliate shall at all times make proper service ▇▇▇▇ use of the
Licensed Marks and Name, including but not limited to use of such symbols or
words as BCBSA shall specify to protect the Licensed Marks and Name and shall
comply with such rules (generally applicable to Affiliates licensed to use the
Licensed Marks and Name) relative to service ▇▇▇▇ use, as are issued from
time-to-time by BCBSA. Affiliate recognizes and agrees that all use of the
Licensed Marks and Name by Affiliate shall inure to the benefit of BCBSA.
B. Affiliate may not directly or indirectly use the Licensed Marks
and Name in a manner that transfers or is intended to transfer in the Service
Area the goodwill associated therewith to another ▇▇▇▇ or name, nor may
Affiliate engage in activity that may dilute or tarnish the unique value of the
Licensed Marks and Name.
C. If Affiliate meets the standards of 2E(1) but not 2E(2) above and
any of Affiliate's advertising or promotional material is reasonably determined
by BCBSA and/or the Plan to be in contravention of rules and regulations
governing the use of the Licensed Marks and Name, Affiliate shall for ninety
(90) days thereafter obtain prior approval from BCBSA of advertising and
promotional efforts using the Licensed Marks and Name, approval or disapproval
thereof to be forthcoming within five (5) business days of receipt of same by
BCBSA or its designee. In all advertising and promotional efforts, Affiliate
shall observe the Service Area limitations applicable to Plan.
D. Affiliate shall use its best efforts in the Service Area to
promote and build the value of the Licensed Marks and Name.
4. SUBLICENSING AND ASSIGNMENT
Affiliate shall not sublicense, transfer, hypothecate, sell,
encumber or mortgage, by operation of law or otherwise, the rights granted
hereunder and any such act shall be voidable at the sole option of Plan or
BCBSA. This Agreement and all rights and duties hereunder are personal to
Affiliate.
5. INFRINGEMENT
Affiliate shall promptly notify Plan and Plan shall promptly notify
BCBSA of any suspected acts of infringement, unfair competition or passing off
that may occur in relation to the Licensed Marks and Name. Affiliate shall not
be entitled
to require Plan or BCBSA to take any actions or institute any proceedings to
prevent infringement, unfair competition or passing off by third parties.
Affiliate agrees to render to Plan and BCBSA, without charge, all reasonable
assistance in connection with any matter pertaining to the protection of the
Licensed Marks and Name by BCBSA.
6. LIABILITY INDEMNIFICATION
Affiliate and Plan hereby agree to save, defend, indemnify and hold
BCBSA harmless from and against all claims, damages, liabilities and costs of
every kind, nature and description (except those arising solely as a result of
BCBSA's negligence) that may arise as a result of or related to Affiliate's
rendering of services under the Licensed Marks and Name.
7. LICENSE TERM
A. Except as otherwise provided herein, the license granted by this
Agreement shall remain in effect for a period of one (1) year and shall be
automatically extended for additional one (1) year periods upon evidence
satisfactory to the Plan and BCBSA that Affiliate meets the then applicable
quality control standards.
B. This Agreement and all of Affiliate's rights hereunder shall
immediately terminate without any further action by any party or entity in the
event that Plan ceases to be authorized to use the Licensed Marks and Name.
C. Notwithstanding any other provision of this Agreement, this
license to use the Licensed Marks and Name may be forthwith terminated by the
Plan or the affirmative vote of the majority of the Board of Directors of BCBSA
present and voting at a special meeting expressly called by BCBSA for the
purpose on ten (10) days written notice for: (1) failure to comply with any
applicable minimum capital or liquidity requirement under the quality control
standards of this Agreement; or (2) failure to comply with the "Organization and
Governance" quality control standard of this Agreement; or (3) impending
financial insolvency; or (4) for a Smaller Affiliate (as defined in Exhibit A),
failure to comply with any of the applicable requirements of Standards 2, 3, 4,
5 or 7 of attached Exhibit A; or (5) such other reason as is determined in good
faith immediately and irreparably to threaten the integrity and reputation of
BCBSA, the Plans, any other licensee including Affiliate and/or the Licensed
Marks and Name.
D. Except as otherwise provided in Paragraphs 7(B), 7(C) or 7(E)
herein, should Affiliate fail to comply with the provisions of this Agreement
and not cure such failure within thirty (30) days of receiving written notice
thereof (or commence a cure within such thirty day period and continue diligent
efforts to complete the cure if such curing cannot reasonably be completed
within such thirty day period) BCBSA or the Plan shall have the right to issue a
notice that the Affiliate is in a state of noncompliance. If a state of
noncompliance as aforesaid is undisputed by the Affiliate or is found to exist
by a mandatory dispute resolution panel and is uncured as provided above, BCBSA
shall have the right to seek judicial enforcement of the Agreement or to issue a
notice of termination thereof. Notwithstanding any other provisions of this
Agreement, any disputes as to the termination of this License pursuant to
Paragraphs 7(B), 7(C) or 7(E) of this Agreement shall not be subject to
mediation and mandatory dispute resolution. All other disputes between BCBSA,
the Plan and/or Affiliate shall be submitted promptly to mediation and mandatory
dispute resolution. The mandatory dispute resolution panel shall have authority
to issue orders for specific performance and assess monetary penalties. Except,
however, as provided in Paragraphs 7(B) and 7(E) of this Agreement, this license
to use the Licensed Marks and Name may not be finally terminated for any reason
without the affirmative vote of a majority of the present and voting members of
the Board of Directors of BCBSA.
E. This Agreement and all of Affiliate's rights hereunder
shall immediately terminate without any further action by any party or entity in
the event that:
(1) Affiliate shall no longer comply with item 2(E) above;
(2) Appropriate dues, royalties and other payments for Affiliate
pursuant to paragraph 9 hereof, which are the royalties for this License
Agreement, are more than sixty (60) days in arrears to BCBSA; or
(3) Any of the following events occur: (i) a voluntary petition
shall be filed by Affiliate seeking bankruptcy, reorganization, arrangement with
creditors or other relief under the bankruptcy laws of the United States or any
other law governing insolvency or debtor relief, or (ii) an involuntary petition
or proceeding shall be filed against Affiliate seeking bankruptcy,
reorganization, arrangement with creditors or other relief under the bankruptcy
laws of the United States of any other law governing insolvency or debtor relief
and such petition or proceeding is consented to or acquiesced in by Affiliate or
is not dismissed within sixty (60) days of the date upon which it was filed, or
(iii) an order for relief is entered against Affiliate in any case under the
bankruptcy laws of the United States, or Affiliate is adjudged bankrupt or
insolvent as those terms are defined in the Uniform Commercial Code as enacted
in the State of Illinois
by any court of competent jurisdiction, or (iv) Affiliate makes a general
assignment of its assets for the benefit of creditors, or (v) the Department of
Insurance or other regulatory agency assumes control of Affiliate or delinquency
proceedings (voluntary or involuntary) are instituted, or (vi) an action is
brought by Affiliate seeking its dissolution or liquidation of its assets or
seeking the appointment of a trustee, interim trustee, receiver or other
custodian for any of its property or business, or (vii) an action is instituted
against Affiliate seeking its dissolution or liquidation of its assets or
seeking the appointment of a trustee, interim trustee, receiver or other
custodian for any of its property or business and such action is consented to or
acquiesced in by Affiliate or is not dismissed within sixty (60) days of the
date upon which it was instituted, or (viii) a trustee, interim trustee,
receiver or other custodian for any of Affiliate's property or business is
appointed.
F. Upon termination of this Agreement for cause or otherwise,
Affiliate agrees that it shall immediately discontinue all use of the Licensed
Marks and Name, including any use in its trade name.
G. Upon termination of this Agreement, Affiliate shall immediately
notify all of its customers that it is no longer a licensee of BCBSA and, if
directed by the Association's Board of Directors, shall provide instruction on
how the customer can contact BCBSA or a designated licensee to obtain further
information on securing coverage. The notification required by this paragraph
shall be in writing and in a form approved by BCBSA. The BCBSA shall have the
right to audit the terminated entity's books and records to verify compliance
with this paragraph.
H. In the event that the Plan has more than 50 percent voting
control of the Affiliate under Paragraph 2(E)(2) above and is a Larger Affiliate
(as defined in Exhibit A), then the vote called for in Paragraphs 7(C) and 7(D)
above shall require the affirmative vote of three-fourths of the Blue Cross
Plans which are Regular Members of BCBSA and three-fourths of the total then
current weighted vote of all the Blue Cross Plans which are Regular Member Plans
of BCBSA.
8. DISPUTE RESOLUTION
The parties agree that any disputes between them or between or among
either of them and one or more Plans or Affiliates of Plans that use in any
manner the Blue Cross and Blue Shield Marks and Name are subject to the
Mediation and Mandatory Dispute Resolution process attached to and made a part
of Plan's License from BCBSA to use the Licensed Marks and Name as Exhibits 5,
5A and 5B as amended from time-to-time, which documents are incorporated herein
by reference as though fully set forth herein.
9. LICENSE FEE
Affiliate will pay to BCBSA a fee for this License determined
pursuant to the formula(s) set forth in Exhibit B.
10. JOINT VENTURE
Nothing contained in the Agreement shall be construed as creating a
joint venture, partnership, agency or employment relationship between Plan and
Affiliate or between either and BCBSA.
11. NOTICES AND CORRESPONDENCE
Notices regarding the subject matter of this Agreement or breach or
termination thereof shall be in writing and shall be addressed in duplicate to
the last known address of each other party, marked respectively to the attention
of its President and, if any, its General Counsel.
12. COMPLETE AGREEMENT
This Agreement contains the complete understandings of the parties
in relation to the subject matter hereof. This Agreement may only be amended by
a writing executed by all parties hereto or by the vote of three-fourths of the
Plans and three-fourths of the total then current weighted vote of all the
Plans.
13. SEVERABILITY
If any term of this Agreement is held to be unlawful by a court of
competent jurisdiction, such findings shall in no way affect the remaining
obligations of the parties hereunder and the court may substitute a lawful term
or condition for any unlawful term or condition so long as the effect of such
substitution is to provide the parties with the benefits of this Agreement.
14. NONWAIVER
No waiver by BCBSA of any breach or default in performance on the
part of Affiliate or any other licensee of any of the terms, covenants or
conditions of this Agreement shall constitute a waiver of any subsequent breach
or default in performance of said terms, covenants or conditions.
15. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of the State of Illinois.
16. HEADINGS
The headings inserted in this agreement are for convenience only and
shall have no bearing on the interpretation hereof.
IN WITNESS WHEREOF, the parties have caused this License Agreement
to be executed and effective as of the date of last signature written below.
Affiliate ________________________________
By:______________________________________
Date:____________________________________
Plan ____________________________________
By:______________________________________
Date:____________________________________
Blue Cross and Blue Shield Association
By:_______________________________________
Date:_____________________________________
EXHIBIT A
AFFILIATE LICENSE STANDARDS
June 1996
PREAMBLE
The standards for licensing affiliates are established by BCBSA and are subject
to change from time-to-time upon the affirmative vote of three-fourths (3/4) of
the Plans and three-fourths (3/4) of the total weighted vote. Each licensed Plan
is required to use a standard affiliate license form provided by BCBSA and to
cooperate fully in assuring that the licensed affiliate maintains compliance
with the license standards.
The Affiliate License provides a flexible vehicle to accommodate the potential
range of health and workers' compensation related products and services Plan
affiliates provide. The Affiliate License collapses former health affiliate
licenses (HCC, HMO, PPO, TPA, and IDS) into a single license using the following
business-based criteria to provide a framework for license standards:
o Percent of affiliate controlled by parent: Greater than 50 percent or 50
percent?
o Risk assumption: yes or no?
o Medical care delivery: yes or no?
o Importance of the affiliate to the parent: If the affiliate has health or
workers' compensation administration business, does such business
constitute 15 percent or more (referred to as a "larger" affiliate) of the
parent's and other licensed health subsidiaries' contract enrollment?
EXHIBIT A (continued)
For purposes of definition:
o A "smaller affiliate:" (1) comprises less than fifteen percent (15%) of
Plan's and its licensed affiliates' total contract enrollment (as reported
on the BCBSA Quarterly Enrollment Report, excluding rider and freestanding
coverage, and treating an entity seeking licensure as licensed);* or (2)
underwrites the indemnity portion of workers' compensation insurance and
has total premium revenue less than 15 percent of the sponsoring Plan's
net subscription revenue.
o A "larger affiliate" comprises fifteen percent (15%) or more of Plan's and
its licensed affiliates' total contract enrollment (as reported on the
BCBSA Quarterly Enrollment Report, excluding rider and freestanding
coverage, and treating an entity seeking licensure as licensed.)*
Conversion to the new license shall be:
o For smaller affiliates:
- immediately for new applicants, and
- January 1, 1996 for existing HMO, PPO, TPA and IDS licensees under
fifteen percent (15%).
o For larger affiliates:
- immediately for new applicants,
- July 1, 1995 for existing health coverage carrier licensees, and
- June 1996, for all other currently licensed affiliates presently at
or over fifteen percent(15%).
Changes in affiliate status:
If any affiliate's status changes regarding: its Plan ownership level, its risk
acceptance or direct delivery of medical care, the affiliate shall notify BCBSA
within thirty (30) days of such occurrence in writing and come into compliance
with the applicable standards within six (6) months.
If a smaller affiliate's health and workers' compensation administration
business surpasses fifteen percent (15%) of the total contract enrollment of the
Plan and licensed affiliates, the affiliate shall:
EXHIBIT A (continued)
1. Within thirty (30) days, notify BCBSA of this fact in writing, including
evidence that the affiliate meets the minimum liquidity and capital (BCBSA
Capital Benchmark and state-established minimum reserve) requirements of
the larger affiliate Financial Responsibility standard; and
2. Within six (6) months after surpassing the fifteen percent (15%)
threshold, demonstrate compliance with all license requirements for a
larger affiliate.
If an affiliate that underwrites the indemnity portion of workers' compensation
insurance receives a change in rating or proposed change in rating, the
affiliate shall notify BCBSA within 30 days of notification by the external
rating agency.
-----------
*For purposes of this calculation,
The numerator equals:
Applicant affiliate's contract enrollment, as defined in BCBSA's Quarterly
Enrollment Report (excluding rider and freestanding coverage).
The denominator equals:
Numerator PLUS Plan and all other licensed affiliates' contract enrollment, as
reported in BCBSA's Quarterly Enrollment Report (excluding rider and
freestanding coverage).
EXHIBIT A (continued)
STANDARDS FOR LICENSED AFFILIATES
Each affiliate seeking licensure must answer all four questions. Depending
on the affiliate's answers, certain standards apply:
1. What percent of the affiliate is controlled by the parent Plan?
More than 50% 50%
(arrow down) (arrow down)
Standard 1A, 4 Standard 1B, 4
IN ADDITION,
2. Is risk being assumed?
Yes No
(arrows down) (arrows down)
Affiliate Affiliate Affiliate Affiliate comprises Affiliate
underwrites comprises (less than)15% comprises (greater than (less than)15% of total comprises (greater
any indemnity of total contract or equal to)15% contract than or equal to)15%
portion of enrollment of of total contract enrollment of Plan of total contract
workers' Plan and its enrollment of and its licensed enrollment of
compensation licensed affiliates, Plan and its affiliates Plan and its
insurance and does not licensed affiliates, (arrow down) licensed affiliates
(arrow down) underwrite the and does not Standard 2 (arrow down)
Standards indemnity portion underwrite the (Guidelines 2.1, 2.3) Standard 6H
7A-7E of workers' indemnity portion
compensation of workers'
insurance compensation
(arrow down) insurance
Standard 2 (arrow down)
(Guidelines 2.1, 2.2) Standard 6H
IN ADDITION,
3. Is medical care being directly provided?
Yes No
(arrow down) (arrow down)
Standard 3A Standard 3B
IN ADDITION,
4. If the affiliate has health or workers' compensation administration
business, does such business comprise 15% or more of the total contract
enrollment of Plan and its licensed affiliates?
Yes No
(arrow down) (arrows down)
Standards 6A-6I Affiliate is a Affiliate is
former primary not a former
licensee primary licensee
(arrow down) (arrow down)
Standards 5,8,9 Standards 5,8
EXHIBIT A (continued)
Standard 1 - Organization and Governance
1A.) The Standard for more than 50% Plan ownership is:
An affiliate shall be organized and operated in such a manner that it is
controlled by a licensed Plan or Plans which have, directly or indirectly: 1)
more than 50% of the voting control of the affiliate; and 2) the legal ability
to prevent any change in the articles of incorporation, bylaws or other
establishing or governing documents of the affiliate with which it does not
concur; and 3) operational control of the affiliate.
1B.) The Standard for 50% Plan ownership is:
An affiliate shall be organized and operated in such a manner that a licensed
Plan or Plans have directly or indirectly:
1) not less than 50% of the voting control of the affiliate; and
2) the legal ability to prevent any change in the articles of
incorporation, bylaws or other establishing or governing documents
of the affiliate with which it does not concur; and
3) at least equal direct or indirect control over the operations of the
affiliate; and
4) sufficient authority so that changes in the following require the
approval of the Licensed Plan or Plans:
o geographic operating area of the affiliate
o the legal and trade names of the affiliate
o the types of activity in which the affiliate engages
o any action which would cause the affiliate to be in
violation of the Standards applicable to Licensure by
BCBSA.
EXHIBIT A (continued)
Standard 2 - Financial Responsibility
An affiliate shall be operated in a manner that provides reasonable financial
assurance that it can fulfill all of its contractual obligations to its
customers. If a risk-assuming affiliate ceases operations for any reason, Blue
Cross and/or Blue Shield Plan coverage will be offered to all affiliate
subscribers without exclusions, limitations or conditions based on health
status. If a nonrisk-assuming affiliate ceases operations for any reason,
sponsoring Plan(s) will provide for services to its (their) customers.
Standard 3 - State Licensure/Certification
3A.) The Standard for an affiliate that employs, owns or contracts on a
substantially exclusive basis for medical services is:
An affiliate shall maintain unimpaired licensure or certification for its
medical care providers to operate under applicable state laws.
3B.) The Standard for an affiliate that does not employ, own or contract on a
substantially exclusive basis for medical services is:
An affiliate shall maintain unimpaired licensure or certification to operate
under applicable state laws.
Standard 4 - Certain Disclosures
An affiliate shall make adequate disclosure in contracting with third parties
and in disseminating public statements of 1) the structure of the Blue Cross and
Blue Shield System; and 2) the independent nature of every licensee; and 3) the
affiliate's financial condition.
Standard 5 - Reports and Records for Certain Smaller Affiliates
For a smaller affiliate that does not underwrite the indemnity portion of
workers' compensation insurance, the Standard is:
An affiliate and/or its licensed Plan(s) shall furnish, on a timely and accurate
basis, reports and records relating to these Standards and the License
Agreements between BCBSA and affiliate.
EXHIBIT A (continued)
Standard 6 - Other Standards for Larger Affiliates
Standards 6(A) - (I) that follow apply to larger affiliates.
Standard 6(A): Board of Directors
An affiliate Governing Board shall act in the interest of its Corporation in
providing cost-effective health care services to its customers. An affiliate
shall maintain a governing Board, which shall control the affiliate, composed of
a majority of persons other than providers of health care services, who shall be
known as public members. A public member shall not be an employee of or have a
financial interest in a health care provider, nor be a member of a profession
which provides health care services.
Standard 6(B): Responsiveness to Customers
An affiliate shall be operated in a manner responsive to customer needs and
requirements.
Standard 6(C): Participation in National Programs
An affiliate shall effectively and efficiently participate in each national
program as from time to time may be adopted by the Member Plans for the purposes
of providing portability of membership between the licensees and ease of claims
processing for customers receiving benefits outside of the affiliate's Service
Area.
Such programs are applicable to licensees, and include:
A. Inter-Plan Transfer Agreement;
B. National Account Equalization Program;
C. BlueCard Program;
EXHIBIT A (continued)
D. Inter-Plan Teleprocessing System (ITS); and
E. Inter-Plan Data Reporting (IPDR) Program.
Standard 6(D): Financial Performance Requirements
In addition to requirements under the national programs listed in
Standard 6C: Participation in National Programs, an affiliate shall take such
action as required to ensure its financial performance in programs and contracts
of an inter-licensee nature or where BCBSA is a party.
Standard 6(E): Cooperation with Plan Performance Response Process
An affiliate shall cooperate with BCBSA's Board of Directors and its Plan
Performance and Financial Standards Committee in the administration of the Plan
Performance Response Process and in addressing affiliate performance problems
identified thereunder.
Standard 6(F): Independent Financial Rating
An affiliate shall obtain a rating of its financial strength from an independent
rating agency approved by BCBSA's Board of Directors for such purpose.
Standard 6(G): Best Efforts
During each year, an affiliate shall use its best efforts in the designated
Service Area to promote and build the value of the Blue ▇▇▇▇▇ ▇▇▇▇.
Standard 6(H): Financial Responsibility
An affiliate shall be operated in a manner that provides reasonable financial
assurance that it can fulfill all of its contractual obligations to its
customers.
EXHIBIT A (continued)
Standard 6(I): Reports and Records
An affiliate shall furnish to BCBSA on a timely and accurate basis reports and
records relating to compliance with these Standards and the License Agreements
between BCBSA and affiliate. Such reports and records are the following:
A) Annual Application for Renewal of Standard Affiliate
License for affiliates, including trade name and service
▇▇▇▇ usage material;
B) Changes in the ownership and governance of the
affiliate, including changes in its charter, articles of
incorporation, or bylaws, changes in an affiliate's
Board composition, or changes in the identity of the
affiliate's Principal Officers, and changes in risk
acceptance, contract growth, or direct delivery of
medical care; and
C) Quarterly Financial Report including the Capital
Benchmark Worksheet, Annual Financial Forecast, Annual
Certified Audit Report, Insurance Department Examination
Report, Annual Statement filed with State Insurance
Department (with all attachments); and
D) Quarterly Utilization Report, Quarterly Enrollment
Report, Cost Containment Report, NMIS Quarterly Report.
Standard 7 - Other Standards for Risk-Assuming Workers' Compensation Affiliates
Standards 7(A) - (E) that follow apply to affiliates that underwrite the
indemnity portion of workers' compensation insurance.
Standard 7 (A): Financial Responsibility
An affiliate shall be operated in a manner that provides reasonable financial
assurance that it can fulfill all of its contractual obligations to its
customers.
EXHIBIT A (continued)
Standard 7(B): Reports and Records
An affiliate shall furnish, on a timely and accurate basis, reports and records
relating to compliance with these Standards and the License Agreements between
BCBSA and the affiliate. Such reports and records are the following:
A. Annual Application for Renewal of Standard Affiliate License for
affiliates, including trade name and service ▇▇▇▇ usage materials; and
B. Annual Certified Audit Report, Annual Statement as filed with the State
Insurance Department (with all attachments), Annual NAIC's Risk-Based
Capital Worksheets for Property and Casualty Insurers, and Annual
Financial Forecast; and
C. Quarterly Financial Report, Quarterly Estimated Risk-Based Capital for
Property and Casualty Insurers, Insurance Department Examination Report,
and Quarterly NMIS Report (for licensed health business only); and
D. Notification of all changes and proposed changes to independent ratings
within 30 days of receipt and submission of a copy of all rating
reports; and
E. Changes in the ownership and governance of the affiliate including changes
in its charter, articles of incorporation, or bylaws, changes in an
affiliate's Board composition, Plan control, state license status,
operating area, the affiliate's Principal Officers or direct delivery of
medical care.
Standard 7(C): Loss Prevention
An affiliate shall apply loss prevention protocol to both new and existing
business.
EXHIBIT A (continued)
Standard 7(D): Claims Administration
An affiliate shall maintain an effective claims administration process that
includes all the necessary functions to assure prompt and proper resolution of
medical and indemnity claims.
Standard 7(E): Disability and Provider Management
An affiliate shall arrange for the provision of appropriate and necessary
medical and rehabilitative services to facilitate early intervention by medical
professionals and timely and appropriate return to work.
Standard 8 - Cooperation with Affiliate License Performance Response Process
Protocol
An affiliate and its Sponsoring Plan(s) shall cooperate with BCBSA's Board of
Directors and its Plan Performance and Financial Standards Committee in the
administration of the Affiliate License Performance Response Process Protocol
(ALPRPP) and in addressing affiliate compliance problems identified thereunder.
Standard 9: Participation in National Programs by Smaller Affiliates
A smaller affiliate for which this standard applies pursuant to the Preamble
section of Exhibit A of the Affiliate License Agreement shall effectively and
efficiently participate in certain national programs from time to time as may be
adopted by Member Plans for the purposes of providing ease of claims processing
for customers receiving benefits outside of the affiliate's service area and be
subject to certain relevant financial and reporting requirements.
EXHIBIT B
ROYALTY FORMULA FOR SECTION 9 OF THE
AFFILIATE LICENSE AGREEMENT
Affiliate will pay BCBSA a fee for this license in accordance with the following
formula:
FOR RISK PRODUCTS:
For affiliates not underwriting the indemnity portion of workers' compensation
insurance:
An amount equal to its pro rata share of each sponsoring Plan's dues payable to
BCBSA computed with the addition of the affiliate's subscription revenue and
contracts arising from products using the marks. The payment by each sponsoring
Plan of its dues to BCBSA, including that portion described in this paragraph,
will satisfy the requirement of this paragraph, and no separate payment will be
necessary.
For affiliates underwriting the indemnity portion of workers' compensation
insurance:
An amount equal to 0.35 percent of the gross revenue per annum of affiliate
arising from products using the marks; plus, an annual fee of $5,000 per license
for an affiliate subject to Standard 7.
FOR NONRISK PRODUCTS:
An amount equal to 0.24 percent of the gross revenue per annum of affiliate
arising from products using the marks; plus:
1) An annual fee of $5,000 per license for an affiliate subject to
Standard 6.
2) An annual fee of $2,000 per license for all other affiliates.
The foregoing shall be reduced by one-half where both a BLUE CROSS(R) and BLUE
SHIELD(R) License are issued to the same affiliate. In the event that any
license period is greater or less than one (1) year, any amounts due shall be
prorated. Royalties under this formula will be calculated, billed and paid in
arrears.
EXHIBIT 1A
CONTROLLED AFFILIATE LICENSE AGREEMENT
APPLICABLE TO LIFE INSURANCE COMPANIES
This agreement by and among Blue Cross and Blue Shield Association
("BCBSA") _______________________________("Controlled Affiliate"), a controlled
affiliate of the Blue Cross Plan(s), known as
_______________________________________("Plan").
WHEREAS, BCBSA is the owner of the BLUE CROSS and BLUE CROSS Design service
marks;
WHEREAS, the Plan and the Controlled Affiliate desire that the latter be
entitled to use the BLUE CROSS and BLUE CROSS Design service marks (collectively
the "Licensed Marks") as service marks and be entitled to use the term BLUE
CROSS in a trade name ("Licensed Name");
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, BCBSA
hereby grants to the Controlled Affiliate the exclusive right to use the
licensed Marks and Names in connection with and only in connection with those
life insurance and related services authorized by applicable state law, other
than health care plans and related services (as defined in the Plan's License
Agreements with BCBSA) which services are not separately licensed to Controlled
Affiliate by BCBSA, in the Service Area served by the Plan, except that BCBSA
reserves the right to use the Licensed Marks and Name in said Service Area, and
except to the extent that said Service Area may overlap the area or areas served
by one or more other licensed Blue Shield Plans as of the date of this License
as to which overlapping areas the rights hereby granted are non-exclusive as to
such other Plan or Plans and their respective Licensed Controlled Affiliates
only. Controlled Affiliate cannot use the Licensed Marks or Name outside the
Service Area or, anything in any other license to Controlled Affiliate
notwithstanding, in its legal or trade name.
2. QUALITY CONTROL
A. Controlled Affiliate agrees to use the Licensed Marks and
Name only in relation to the sale, marketing and rendering of authorized
products and further agrees to be bound by the conditions regarding quality
control shown in Exhibit A as it may be amended by BCBSA from time-to-time.
Amended as of November 17, 1994
-1-
B. Controlled Affiliate agrees that Plan and/or BCBSA may, from
time-to-time, upon reasonable notice, review and inspect the manner and method
of Controlled Affiliate's rendering of service and use of the Licensed Marks and
Name.
C. Controlled Affiliate agrees that it will provide on an annual
basis (or more often if reasonably required by Plan or by BCBSA) a report to
Plan and BCBSA demonstrating Controlled Affiliate's compliance with the
requirements of this Agreement including but not limited to the quality control
provisions of Exhibit A.
D. As used herein, a Controlled Affiliate is defined as an entity
organized and operated in such a manner that it is subject to the bona fide
control of a Plan or Plans. Absent written approval by BCBSA of an alternative
method of control, bona fide control shall mean the legal authority, directly or
indirectly through wholly-owned subsidiaries: (a) to select members of the
Controlled Affiliate's governing body having not less than 51% voting control
thereof; (b) to exercise operational control with respect to the governance
thereof; and (c) to prevent any change in its articles of incorporation, bylaws
or other governing documents deemed inappropriate. In addition, a Plan or Plans
shall own at least 51% of any for-profit Controlled Affiliate. If the Controlled
Affiliate is a mutual company, the Plan or its designee(s) shall have and
maintain, in lieu of the requirements of items (a) and (c) above, proxies
representing 51% of the votes at any meeting of the policyholders and shall
demonstrate that there is no reason to believe this such proxies shall be
revoked by sufficient policyholders to reduce such percentage below 51%.
3. SERVICE ▇▇▇▇ USE
Controlled Affiliate shall at all times make proper
service ▇▇▇▇ use of the Licensed Marks, including but not limited to use of such
symbols or words as BCBSA shall specify to protect the Licensed Marks, and shall
comply with such rules (applicable to all Controlled Affiliates licensed to use
the Marks) relative to service ▇▇▇▇ use, as are issued from time-to-time by
BCBSA. If there is any public reference to the affiliation between the Plan and
the Controlled Affiliate, all of the Controlled Affiliate's licensed services in
the Service Area of the Plan shall be rendered under the Licensed Marks.
Controlled Affiliate recognizes and agrees that all use of the Licensed Marks by
Controlled Affiliate shall inure to the benefit of BCBSA.
4. SUBLICENSING AND ASSIGNMENT
Controlled Affiliate shall not sublicense, transfer,
hypothecate, sell, encumber or mortgage, by operation of law or otherwise, the
rights granted hereunder and any such act shall be
-2-
voidable at the option of Plan or BCBSA. This Agreement and all rights and
duties hereunder are personal to Controlled Affiliate.
5. INFRINGEMENTS
Controlled Affiliate shall promptly notify Plan and
BCBSA of any suspected acts of infringement, unfair competition or passing off
which may occur in relation to the Licensed Marks. Controlled Affiliate shall
not be entitled to require Plan or BCBSA to take any actions or institute any
proceedings to prevent infringement, unfair competition or passing off by third
parties. Controlled Affiliate agrees to render to Plan and BCBSA, free of
charge, all reasonable assistance in connection with any matter pertaining to
the protection of the Licensed Marks by BCBSA.
6. LIABILITY INDEMNIFICATION
Controlled Affiliate hereby agrees to save, defend,
indemnify and hold Plan and BCBSA harmless from and against all claims, damages,
liabilities and costs of every kind, nature and description which may arise as a
result of Controlled Affiliate's rendering of health care services under the
Licensed Marks.
7. LICENSE TERM
The license granted by this Agreement shall remain in
effect for a period of one (1) year and shall be automatically extended for
additional one (1) year periods upon evidence satisfactory to the Plan and BCBSA
that Controlled Affiliate meets the then applicable quality control standards,
unless one of the parties hereto notifies the other party of the termination
hereof at least sixty (60) days prior to expiration of any license period.
This Agreement may be terminated by the Plan or by
BCBSA for cause at any time provided that Controlled Affiliate has been given a
reasonable opportunity to cure and shall not effect such a cure within thirty
(30) days of receiving written notice of the intent to terminate (or commence a
cure within such thirty day period and continue diligent efforts to complete the
cure if such curing cannot reasonably be completed within such thirty day
period). By way of example and not for purposes of limitation, Controlled
Affiliate's failure to abide by the quality control provisions of Paragraph 2,
above, shall be considered a proper ground for cancellation of this Agreement.
This Agreement and all of Controlled Affiliate's
rights hereunder shall immediately terminate without any further action by any
party or entity in the event that:
-3-
A. Controlled Affiliate shall no longer comply with Standard No. 1
(Organization and Governance) of Exhibit A or, following an opportunity to cure,
with the remaining quality control provisions of Exhibit A, as it may be amended
from time-to-time; or
B. Plan ceases to be authorized to use the Licensed Marks; or
C. Appropriate dues for Controlled Affiliate pursuant to item 8
hereof, which are the royalties for this License Agreement are more than sixty
(60) days in arrears to BCBSA.
Upon termination of this Agreement for cause or otherwise,
Controlled Affiliate agrees that it shall immediately discontinue all use of the
Licensed Marks including any use in its trade name.
In the event of any disagreement between Plan and BCBSA as to
whether grounds exist for termination or as to any other term or condition
hereof, the decision of BCBSA shall control, subject to provisions for mediation
or mandatory dispute resolution in effect between the parties.
Upon termination of this Agreement, Licensed Controlled Affiliate
shall immediately notify all of its customers that it is no longer a licensee of
the Blue Cross and Blue Shield Association and provide instruction on how the
customer can contact the Blue Cross and Blue Shield Association or a designated
licensee to obtain further information on securing coverage. The written
notification required by this paragraph shall be in writing and in a form
approved by the Association. The Association shall have the right to audit the
terminated entity's books and records to verify compliance with this paragraph.
8. DUES
Controlled Affiliate will pay to BCBSA a fee for this license in
accordance with the following formula:
o An annual fee of five thousand dollars ($5,000) per license, plus
o .05 percent of gross revenue per annum of Licensee arising from
group products using the Marks, plus
o .5 percent of gross revenue per annum of Licensee arising from
individual products using the Marks
The foregoing percentages shall be reduced by one-half where both a
BLUE CROSS(R) and BLUE SHIELD(R) license are issued to the same
entity. In the event that any License period is greater or less than
one (1) year, any amounts due shall be prorated. Royalties under
this formula will be calculated, billed and paid in arrears.
Amended as of September 29, 1994
-4-
Plan will promptly and timely transmit to BCBSA all dues owed by
Controlled Affiliate as determined by the above formula and if Plan shall fail
to do so, Controlled Affiliate shall pay such dues directly.
9. JOINT VENTURE
Nothing contained in this Agreement shall be construed as creating a
joint venture, partnership, agency or employment relationship between Plan and
Controlled Affiliate or between either and BCBSA.
-4a-
10. NOTICES AND CORRESPONDENCE
Notices regarding the subject matter of this Agreement or breach or
termination thereof shall be in writing and shall be addressed in duplicate to
the last known address of each other party, marked respectively to the attention
of its President and, if any, its General Counsel.
11. COMPLETE AGREEMENT
This Agreement contains the complete understandings of the parties
in relation to the subject matter hereof. This Agreement may only be amended by
a writing executed by all parties.
12. SEVERABILITY
If any term of this Agreement is held to be unlawful by a court of
competent jurisdiction, such finding shall in no way effect the remaining
obligations of the parties hereunder and the court may substitute a lawful term
or condition for any unlawful term or condition so long as the effect of such
substitution is to provide the parties with the benefits of this Agreement.
13. NONWAIVER
No waiver by BCBSA of any breach or default in performance on the
part of the Controlled Affiliate or any other licensee of any of the terms,
covenants or conditions of this Agreement shall constitute a waiver of any
subsequent breach or default in performance of said terms, covenants or
conditions.
14. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this License Agreement to be
executed, effective as of the date of last signature written below.
BLUE CROSS AND BLUE SHIELD ASSOCIATION
By:___________________________________
Date:_________________________________
______________________________________
Controlled Affiliate
By:___________________________________
Date:_________________________________
Plan:_________________________________
-5-
EXHIBIT A
CONTROLLED AFFILIATE LICENSE STANDARDS
LIFE INSURANCE COMPANIES
Page 1 of 2
PREAMBLE
The standards for licensing Life Insurance Companies (Life and Health Insurance
companies, as defined by state statute) are established by BCBSA and are subject
to change from time-to-time upon the affirmative vote of three-fourths (3/4) of
the Plans and three-fourths (3/4) of the total weighted vote of all Plans. Each
Licensed Plan is required to use a standard controlled affiliate license form
provided by BCBSA and to cooperate fully in assuring that the licensed Life
Insurance Company maintains compliance with the license standards.
An organization meeting the following standards shall be eligible for a license
to use the Licensed Marks within the service area of its sponsoring Licensed
Plan to the extent and the manner authorized under the Controlled Affiliate
License applicable to Life Insurance Companies and the principal license to the
Plan.
Standard 1 - Organization and Governance
The LIC shall be organized and operated in such a manner that it is controlled
by a licensed Plan or Plans which have, directly or indirectly: 1) not less than
51% of the voting control of the LIC; and 2) the legal ability to prevent any
change in the articles of incorporation, bylaws or other establishing or
governing documents of the LIC with which it does not concur; and 3) operational
control of the LIC.
If the LIC is a mutual company, the Plan or its designee(s) shall have and
maintain, in lieu of the requirements of items 1 and 2 above, proxies
representing at least 51% of the votes at any policyholder meeting and shall
demonstrate that there is no reason to believe such proxies shall be revoked by
sufficient policyholders to reduce such percentage below 51%.
Standard 2 - State Licensure
The LIC must maintain unimpaired licensure or certificate of authority to
operate under applicable state laws as a life and health insurance company in
each state in which the LIC does business.
Standard 3 - Records and Examination
The LIC and its sponsoring licensed Plan(s) shall maintain and furnish, on a
timely and accurate basis, such records and reports regarding the LIC as may be
required in order to establish compliance with the license agreement. The LIC
and its sponsoring licensed Plan(s) shall permit BCBSA to examine the affairs of
the LIC and shall agree that BCBSA's board may submit a written report to the
chief executive officer(s) and the board(s) of directors of the sponsoring
Plan(s).
-1-
CONTROLLED AFFILIATE LICENSE STANDARDS
LIFE INSURANCE COMPANIES
Page 2 of 2
Standard 4 - Mediation
The LIC and its sponsoring Plan(s) shall agree to use the then-current BCBSA
mediation and mandatory dispute resolution processes, in lieu of a legal action
between or among another licensed controlled affiliate, a licensed Plan or
BCBSA.
Standard 5 - Financial Responsibility
The LIC shall maintain adequate financial resources to protect its customers and
meet its business obligations.
-2-
EXHIBIT 2
Membership Standards
Page 1 of 3
Preamble
The Membership Standards apply to all organizations seeking to become or to
continue as Regular Members of the Blue Cross and Blue Shield Association. Any
organization seeking to become a Regular Member must be found to be in
substantial compliance with all Membership Standards at the time membership is
granted and the organization must be found to be in substantial compliance with
all Membership Standards for a period of two (2) years preceding the date of its
application. If Membership is sought by an entity which controls or is
controlled by one or more Plans, such compliance shall be determined on the
basis of compliance by such Plan or Plans.
The Regular Member Plans shall have authority to interpret these Standards.
Compliance with any Membership Standard may be excused, at the Plans'
discretion, if the Plans agree that compliance with such Standard would require
the Plan to violate a law or governmental regulation governing its operation or
activities.
Standard 1: A Plan's Board shall not be controlled by any
special interest group, and shall act in the
interest of its Corporation in providing
cost-effective health care services to its
customers. A Plan shall maintain a governing
Board, which shall control the Plan, composed
of a majority of persons other than providers
of health care services, who shall be known as
public members. A public member shall not be an
employee of or have a financial interest in a
health care provider, nor be a member of a
profession which provides health care services.
Standard 2: A Plan shall furnish to the Association on a
timely and accurate basis reports and records
relating to compliance with these Standards and
the License Agreements between the Association
and the Plans. Such reports and records are the
following:
A. Annual Application for Renewal of
BCBSA Membership, including trade
name and service ▇▇▇▇ usage material;
B. Changes in the governance of the Plan,
including changes in a Plan's Charter,
Articles of Incorporation, or Bylaws,
changes in a Plan's Board composition,
or changes in the identity of the
Plan's Principal Officers;
Amended as of June 24, 1994
EXHIBIT 2
Membership Standards
Page 2 of 3
C. Quarterly Financial Report including
the Plan Capital Benchmark Worksheet,
Annual Financial Forecast, Annual
Certified Audit Report, Insurance
Department Examination Report, Annual
Statement filed with State Insurance
Department (with all attachments), and
Consolidating Financial Statement;
D. Quarterly Utilization Report,
Quarterly Enrollment Report, Cost
Containment Report, and NMIS Quarterly
Report.
Standard 3: A Plan shall be operated in a manner that
provides reasonable financial assurance that it
can fulfill its contractual obligations to its
customers.
Standard 4: A Plan shall be operated in a manner responsive
to customer needs and requirements.
Standard 5: A Plan shall effectively and efficiently
participate in each national program as from
time to time may be adopted by the Member Plans
for the purposes of providing portability of
membership between the Plans and ease of claims
processing for customers receiving benefits
outside of the Plan's Service Area.
Such programs are applicable to Blue Cross and Blue Shield
Plans, and include:
A. Inter-Plan Transfer Agreement;
B. National Account Equalization Program;
C. Inter-Plan Data Reporting (IPDR) Program;
D. Inter-Plan Teleprocessing System (ITS); and
E. BlueCard Program.
Amended as of August 2, 1996
EXHIBIT 2
Membership Standards
Page 3 of 3
Standard 6: In addition to requirements under the national programs listed in
Standard 5: Participation in National Programs, a Plan shall take such action as
required to ensure its financial performance in programs and contracts of an
inter-Plan nature or where the Association is a party.
Standard 7: A Plan shall make adequate disclosure in contracting with third
parties and in disseminating public statements of (i) the structure of the Blue
Cross and Blue Shield System, (ii) the independent nature of every Plan, and
(iii) the Plan's financial condition.
Standard 8: A Plan shall cooperate with the Association's Board of Directors and
its Plan Performance and Financial Standards Committee in the administration of
the Plan Performance Response Process and in addressing Plan performance
problems identified thereunder.
Standard 9: A Plan shall obtain a rating of its financial strength from an
independent rating agency approved by the Association's Board of Directors for
such purpose.
Standard 10: During each year, a Plan and its Controlled Affiliate(s) engaged in
providing licensable services (excluding Life Insurance and Charitable
Foundation Services) shall use their best efforts in the designated Service Area
to promote and build the value of the Blue Cross and Blue Shield Marks.
Standard 11 Neither a Plan nor any Larger Affiliate shall cause or permit an
unlicensed entity to obtain control of the Plan or Larger Affiliate or to
acquire a substantial portion of its assets related to licensable services.
Amended as of September 19, 1996
EXHIBIT 3
GUIDELINES WITH RESPECT TO USE OF
LICENSED NAME AND MARKS IN CONNECTION WITH NATIONAL ACCOUNTS
Page 1 of 3
1. The strength of the Blue Cross/Blue Shield National Accounts mechanism, and
the continued provision of cost effective, quality health care benefits to
National Accounts, are predicated on locally managed provider networks
coordinated on a national scale in a manner consistent with effective service to
National Account customers and consistent with the preservation of the integrity
of the Blue Cross/Blue Shield system and the Licensed Marks. These guidelines
shall be interpreted in keeping with such ends.
2. A National Account is an entity with employee and/or retiree locations in
more than one Plan's Service Area. Unless otherwise agreed, a National Account
is deemed located in the Service Area in which the corporate headquarters of the
National Account is located. The Control Plan of a National Account is the Plan
in whose Service Area the National Account is located. A participating ("Par")
Plan is a Plan in whose Service Area the National Account has employee and/or
retiree locations, but in which the National Account is not located.
3. The National Account Guidelines enunciated herein below shall be applicable
only with respect to the business of new National Accounts acquired after
January 1, 1991.
4. Control Plans shall utilize National Account identification cards complying
with then currently effective BCBSA graphic standards in connection with all
National Accounts business to facilitate administration thereof, to minimize
subscriber and provider confusion, and to reflect a commitment to cooperation
among Plans.
5. Disputes among Plans and/or BCBSA as to the interpretation or implementation
of these Guidelines or as to other National Accounts issues shall be submitted
to mediation and mandatory dispute resolution as provided in the License
Agreement. For two years from the effective date of the License Agreement,
however, such disputes shall be subject to mediation only, with the results of
such mediation to be collected and reported in order to establish more
definitive operating parameters for National Accounts business and to serve as
ground rules for future binding dispute resolution.
EXHIBIT 3
Page 2 of 3
6. The Control Plan may use the BlueCard Program (as defined by IPOC) to deliver
benefits to employees and non-Medicare eligible retirees in a Participating
Plan's service area if an alternative arrangement with the Participating Plan
cannot be negotiated. The Participating Plan's minimum servicing requirement for
those employees and non-Medicare retirees in its service area is to deliver
benefits using the BlueCard Program. Account delivery is subject to the
policies, provisions and procedures of the BlueCard Program.
7. For provider payments in a Participating Plan's area (on non-BlueCard
claims), payment to the provider may be made by the Participating Plan or the
Control Plan at the Participating Plan's option. If the Participating Plan
elects to pay the provider, it may not withhold payment of a claim verified by
the Control Plan or its designated processor, and payment must be in conformity
with service criteria established by the Board of Directors of BCBSA (or an
authorized committee thereof) to assure prompt payment, good service and minimum
confusion with providers and subscribers. The Control Plan, at the Participating
Plan's request, will also assure that measures are taken to protect the
confidentiality of the data pertaining to provider reimbursement levels and
profiles.
8. For claim payments in a Participating Plan's area (on non-BlueCard claims),
Participating Plans are strongly encouraged, but not required, to pass along to
the Control Plan part or all of local provider discounts and differentials for
use by the Control Plan in negotiating financial arrangements with National
Accounts. However, since the size, basis, form and use of local differentials
can vary substantially among Plans and also by individual National Account
characteristics, the degree and form of any discount or differential passed
along to the Control Plan shall be strictly a matter of negotiated contractual
agreement between a Participating Plan and the Control Plan and may also vary
from one National Account to another. In order to facilitate the quotation of
national account pricing and the offering of a variety of National Account
delivery systems, all Plans are strongly encouraged to periodically publish to
other Plans and the BCBSA their National Account contracting policies with
respect to the handling of differentials.
The Control Plan, in its financial agreements with a National Account,
is expected to reasonably reflect the aggregate amount of differentials passed
along to the Control Plan by all Participating Plans in a National Account. The
exact form and substance of this may vary from one National Account to another
and shall be a matter of
Amended as of June 14, 1996
EXHIBIT 3
Page 3 of 3
explicit negotiation and contractual relationship between the National Account
and the Control Plan. The specifics in an agreement between the Control Plan and
the National Account may vary in form (e.g., a guaranteed offset against
retentions, or a direct pass through, or a guaranteed aggregate percentage
discount, or no pass back at all, etc.), and the Control Plan has the
responsibility and the Authority to negotiate precise arrangements. However,
irrespective of the final arrangements between the Control Plan and the National
Account, a Participating Plan's liability for passing along differentials shall
be limited to the contractual agreement the Participating Plan has with the
Control Plan on a specific National Account.
9. Other than in contracting with health care providers or soliciting such
contracts in areas contiguous to a Plan's Service Area in order to serve its
subscribers or those of its licensed Controlled Affiliate residing or working in
its Service Area, a Control Plan may not use the Licensed Marks and/or Name, as
a tag line or otherwise, to negotiate directly with providers outside its
Service Area.
EXHIBIT 4
GOVERNMENT PROGRAMS AND CERTAIN OTHER USES
Page 1 of 2
1. A Plan and its licensed Controlled Affiliate may use the Licensed Marks and
Name in bidding on and executing a contract to serve a Government Program, and
in thereafter communicating with the Government concerning the Program. With
respect, however, to such contracts entered into after the 1st day of January,
1991, the Licensed Marks and Name will not be used in communications or
transactions with beneficiaries or providers in the Government Program located
outside a Plan's Service Area, unless the Plan can demonstrate to the
satisfaction of BCBSA's governing body that such a restriction on use of the
Licensed Marks and Name will jeopardize its ability to procure the contract for
the Government Program. As to both existing and future contracts for Government
Programs, Plans will discontinue use of the Licensed Marks and Name as to
beneficiaries and Providers outside their Service Area as expenditiously as
circumstances reasonably permit. Effective January 1, 1995, except as provided
in the first sentence above, all use by a Plan of the Licensed Marks and Name in
Government Programs outside of the Plan's Service Area shall be discontinued.
Incidental communications outside a Plan's Service Area with resident or former
resident beneficiaries of the Plan, and other categories of necessary incidental
communications approved by BCBSA, are not prohibited.
2. In connection with activity otherwise in furtherance of the License
Agreement, a Plan may use the Licensed Marks and Name outside its Service Area
in the following circumstances which are deemed legitimate and necessary and not
likely to cause consumer confusion:
a. sending letterhead, envelopes, and similar items for
administrative purposes which do not solicit the sale of
health care plans and related services;
b. distributing business cards other than in marketing and
selling;
c. contracting with health care providers or soliciting
such contracts in areas contiguous to a Plan's Service
Area in order to serve its subscribers or those of its
licensed Controlled Affiliate residing or working in its
service area;
d. issuing a small sign containing the legal name or trade
name of the Plan or its licensed Controlled Affiliate
for display by a provider to identify the latter as a
participating provider of the Plan or Controlled
Affiliate;
EXHIBIT 4
Page 2 of 2
e. advertising in publications or electronic media solely
to persons for employment;
f. advertising in print, electronic or other media which
serve, as a substantial market, the Service Area of the
Plan or licensed Controlled Affiliate, provided that no
Plan may advertise outside its Service Area on the
national broadcast and cable networks and that
advertisements in national print media are limited to
the smallest regional edition encompassing the Service
Area;
g. advertising by direct mail where the addressee's zip
code plus 4 includes, at least in part, the Plan's
Service Area or that of a licensed Controlled Affiliate.
EXHIBIT 5
MEDIATION AND MANDATORY DISPUTE RESOLUTION (MMDR) RULES
The Blue Cross and Blue Shield Plans ("Plans") and the Blue Cross
Blue Shield Association ("BCBSA") recognize and acknowledge that the Blue Cross
and Blue Shield system is a unique nonprofit and for-profit system offering cost
effective health care financing and services. The Plans and BCBSA desire to
utilize Mediation and Mandatory Dispute Resolution ("MMDR") to avoid expensive
and time-consuming litigation that may otherwise occur in the federal and state
judicial systems. Even MMDR should be viewed, however, as methods of last
resort, all other procedures for dispute resolution having failed. Except as
otherwise provided in the License Agreements, the Plans, their Controlled
Affiliates and BCBSA agree to submit all disputes to MMDR pursuant to these
Rules and in lieu of litigation.
1. Initiation of Proceedings
A. Pre-MMDR Efforts
Before filing a Complaint to invoke the MMDR process, the CEO of a
complaining party, or his/her designated representative, shall undertake good
faith efforts with the other side(s) to try to resolve any dispute.
B. Complaint
To commence a proceeding, the complaining party (or parties) shall
provide by certified mail, return receipt requested, a written Complaint to the
BCBSA Corporate Secretary (which shall also constitute service on BCBSA if it is
a respondent) and to any Plan(s) and/or Controlled Affiliate(s) named therein.
The Complaint shall contain:
i. identification of the complaining party (or
parties) requesting the proceeding;
ii. identification of the respondent(s);
iii. identification of any other persons or entities
who are interested in a resolution of the
dispute;
iv. a full statement describing the nature of the
dispute;
v. identification of all of the issues that are
being submitted for resolution;
Amended as of November 21, 1996
vi. the remedy sought;
vii. a statement as to whether the complaining party
(or parties) elect(s) first to pursue Mediation;
viii. any request, if applicable, that one or more
members of the Mediation Committee be disqualified
from the proceeding and the grounds for such
request;
ix. any request, if applicable, that the matter be
handled on an expedited basis and the reasons
therefor; and
x. a statement signed by the CEO of the complaining
party affirming that the CEO has undertaken
efforts, or has directed efforts to be undertaken,
to resolve the dispute before resorting to the
MMDR process.
The complaining party (or parties) shall file and serve with the Complaint
copies of all documents which the party (or parties) intend(s) to offer at the
Arbitration Hearing and a statement identifying the witnesses the party (or
parties) intend(s) to present at the Hearing, along with a summary of each
witness' expected testimony.
C. Answer
Within twenty (20) days after receipt of the Complaint, each
respondent shall serve on the BCBSA and on the complaining party (or parties)
and on the Chairman of the Mediation Committee;
i. a full Answer to the aforesaid Complaint;
ii. a statement of any Counterclaims against the
complaining party (or parties), providing with
respect thereto the information specified in
Paragraph 1.B., above;
iii. a statement as to whether the respondent elects to
first pursue Mediation;
iv. any request, if applicable, that one or more
members of the Mediation Committee be disqualified
from the proceeding and the grounds for such
request; and
v. any request, if applicable, that the matter be
handled on an expedited basis and the reasons
therefor.
The respondent(s) shall file and serve with the Answer or by the date of the
Initial Conference set forth in Paragraph 3.B., below, copies of all documents
which the respondent(s) intend(s) to offer at the Arbitration Hearing and a
statement identifying the witnesses the party (or parties) intend(s) to present
at the Hearing, along with a summary of each witness' expected testimony.
D. Reply To Counterclaim
Within ten (10) days after receipt of any Counterclaim, the
complaining party (or parties) shall serve on BCBSA and on the responding party
(or parties) and on the Chairman of the Mediation Committee, a Reply to the
Counterclaim. Such Reply must provide the same information required by Paragraph
1.C.
2. Mediation
A. Mediation Committee
To facilitate the mediation of disputes between or among BCBSA, the
Plans and/or their Controlled Affiliates, the BCBSA Board has established a
Mediation Committee. Mediation may be pursued in lieu of or in an effort to
obviate the Mandatory Dispute Resolution process, and all parties are strongly
urged to exhaust the mediation procedure.
B. Election To Mediate
If any party elects first to pursue Mediation, and if it appears to
the Corporate Secretary that the dispute falls within the jurisdiction of the
Mediation Committee, as set forth in Exhibit 5-A hereto, then the Corporate
Secretary will promptly furnish the Mediation Committee with copies of the
Complaint, Answer, Counterclaim and Reply to Counterclaim, and other documents
referenced in Paragraph 1, above.
C. Selection of Mediators
The parties shall promptly attempt to agree upon: (i) the number of
mediators desired, not to exceed three mediators; and (ii) the selection of the
mediator(s) who may include members of the Mediation Committee and/or
experienced mediators from an independent entity to mediate all disputes set
forth in the Complaint and Answer (and Counterclaim and Reply, if any). In the
event the parties cannot agree upon the number of mediators desired, that number
shall default to three. In the event the parties cannot agree upon the selection
of mediator(s), the Chairman will select the mediator(s), at least one of which
shall be an experienced mediator from an independent entity, consistent with the
provisions set forth in this Paragraph. No member of the Mediation Committee who
is a representative of any party to the Mediation may be selected to mediate the
dispute. The Chairman shall also endeavor not to select as a mediator any member
of the Mediation Committee whom a party has requested to be disqualified. If,
after due regard for availability, expertise, and such other considerations as
may best promote an expeditious Mediation, the Chairman
believes that he or she must consider for selection a member of the Mediation
Committee whom a party has requested to be disqualified, the other members of
the Committee eligible to be selected to mediate the dispute shall decide the
request for disqualification. By agreeing to participate in the Mediation of a
dispute, a member of the Mediation Committee represents to the party (or
parties) thereto that he or she knows of no grounds which would require his or
her disqualification.
D. Binding Decision
Before the date of the Mediation Hearing described below, the
Corporate Secretary will contact the party (or parties) to determine whether
they wish to be bound by any recommendation of the selected mediators for
resolution of the disputes. If all wish to be bound, the Corporate Secretary
will send appropriate documentation to them for their signatures before the
Mediation Hearing begins.
E. Mediation Procedure
The Chairman shall promptly advise the parties of a scheduled
Mediation Hearing date. Unless a party requests an expedited procedure, or
unless all parties to the proceeding agree to one or more extensions of time,
the Mediation Hearing set forth below shall be completed within forty (40) days
of BCBSA's receipt of the Complaint. The selected mediators, unless the parties
otherwise agree, shall adhere to the following procedure:
i. Each party must be represented by its CEO or other
representative who has been delegated full
authority to resolve the dispute. However,
parties may send additional representatives as
they see fit.
ii. By no later than five (5) days prior to the date
designated for the Mediation Hearing, each party
shall supply and serve a list of all persons who
will be attending the Mediation Hearing, and
indicate who will have the authority to resolve
the dispute.
iii. Each party will be given one-half hour to present
its case, beginning with the complaining party (or
parties), followed by the other party or parties.
The parties are free to structure their
presentations as they see fit, using oral
statements or direct examination of witnesses.
However, neither cross-examination nor questioning
of opposing representatives will be permitted. At
the close of each presentation, the selected
mediators will be given an opportunity to ask
questions of the presenters and witnesses. All
parties must be present throughout the Mediation
Hearing. The selected mediators may extend the
time allowed for each party's presentation at the
Mediation Hearing. The selected mediators may
meet in executive session, outside the presence of
the parties, or may meet with the parties
separately, to discuss the controversy.
iv. After the close of the presentations, the parties
will attempt to negotiate a settlement of the
dispute. If the parties desire, the selected
mediators, or any one or more of the selected
mediators, will sit in on the negotiations.
v. After the close of the presentations, the selected
mediators may meet privately to agree upon a
recommendation for resolution of the dispute which
would be submitted to the parties for their
consideration and approval. If the parties have
previously agreed to be bound by the results of
this procedure, this recommendation shall be
binding upon the parties.
vi. The purpose of the Mediation Hearing is to assist
the parties to settle their grievances short of
mandatory dispute resolution. As a result, the
Mediation Hearing has been designed to be as
informal as possible. Rules of evidence shall not
apply. There will be no transcript of the
proceedings, and no party may make a tape
recording of the Mediation Hearing.
vii. In order to facilitate a free and open discussion,
the Mediation proceeding shall remain
confidential. A "Stipulation to Confidentiality"
which prohibits future use of settlement offers,
all position papers or other statements furnished
to the selected mediators, and decisions or
recommendations in any Mediation proceeding shall
be executed by each party.
viii. Upon request of the selected mediators, or one of
the parties, BCBSA staff may also submit
documentation at any time during the proceedings.
F. Notice Of Termination Of Mediation
If the Mediation cannot be completed within the prescribed or agreed
time period due to the lack of cooperation of any party, as determined by the
selected mediators, or if the Mediation does not result in a final resolution of
all disputes at the Mediation Hearing or within forty (40) days after the
Complaint was served, whichever comes first, any party or any one of the
selected mediators may so notify the Corporate Secretary, who shall promptly
issue a Notice of termination of mediation to all parties, to the selected
mediators, and to the MDR Administrator, defined below. Such notice shall serve
to bring the Mediation to an end and to initiate Mandatory Dispute Resolution.
Upon agreement of all parties and the selected mediators, the Mediation process
may continue at the same time the MDR process is invoked. The Notice described
above would serve to initiate the MDR proceeding and would not terminate the
proceedings.
3. Mandatory Dispute Resolution (MDR)
If all parties elect not to first pursue Mediation, or if a notice
of termination of Mediation is issued as set forth in Paragraph 2.F., above,
then the unresolved disputes set forth in any Complaint and Answer (and
Counterclaim and Reply, if any) shall be subject to MDR.
A. MDR Administrator
The Administrator shall be an independent entity such as the Center
for Public Resources, Inc. or Endispute, Inc., specializing in alternative
dispute resolution. The Administrator shall be designated initially, and may be
changed from time to time, by the affirmative vote of fifty-one (51) percent of
the Plans and fifty-one (51) percent of the total then current weighted vote of
all the Plans.
B. Initial Conference
Within five (5) days after a Notice of Termination has issued, or
within five (5) days after the time for filing and serving the Reply to any
Counterclaim if the parties elect first not to mediate, the parties shall confer
with the Administrator to discuss selecting a dispute resolution panel ("the
Panel"). This Initial Conference may be by telephone. The parties are encouraged
to agree to the composition of the Panel and to present that agreement to the
Administrator at the Initial Conference. If the parties do not agree on the
composition of the Panel by the time of the Initial Conference, or by any
extension thereof agreed to by all parties and the Administrator, then the Panel
Selection Process set forth in subparagraph C shall be followed.
C. Panel Selection Process
The Administrator shall designate at least seven potential
arbitrators. The exact number designated shall be sufficient to give each party
at least two peremptory strikes. Each party shall be permitted to strike any
designee for cause and the Administrator shall determine the sufficiency thereof
in its sole discretion. The Administrator will designate a replacement for any
designee so stricken. Each party shall then be permitted two peremptory strikes.
From the remaining designees, the Administrator shall select a three member
Panel. The Administrator shall set the dates for exercising all strikes and
shall complete the Panel Selection Process within fifteen (15) days of the
Initial Conference. Each Arbitrator shall be compensated at his or her normal
hourly rate or, in the absence of an established rate, at a reasonable hourly
rate to be promptly fixed by the Administrator for all time spent in connection
with the proceedings and shall be reimbursed for any travel and other reasonable
expenses.
D. Duties Of The Arbitrators
The Panel shall promptly designate a Presiding Arbitrator for the
purposes reflected below, but shall retain the power to review and modify any
ruling or other action of said Presiding Arbitrator. Each Arbitrator shall be an
independent Arbitrator, shall be governed by the Code of Ethics for Arbitrators
in Commercial Disputes, appended as Exhibit "5-B" hereto, and shall at or prior
to the commencement of any Arbitration Hearing take an oath to that effect. Each
Arbitrator shall promptly disclose in writing to the Panel and to the parties
any circumstances, whenever arising, that might cause doubt as to such
Arbitrator's compliance, or ability to comply, with said Code of Ethics, and,
absent resignation by such Arbitrator, the remaining Arbitrators shall determine
in their sole discretion whether the circumstances so disclosed constitute
grounds for disqualification and for replacement. With respect to such
circumstances arising or coming to the attention of a party after an
Arbitrator's selection, a party may likewise request the Arbitrator's
resignation or a determination as to disqualification by the remaining
Arbitrators. With respect to a sole Arbitrator, the determination as to
disqualification shall be made by the Administrator.
There shall be no ex parte communication between the parties or
their counsel and any member of the Panel.
E. Panel's Jurisdiction And Authority
The Panel's jurisdiction and authority shall extend to all disputes
between or among the Plans, their Controlled Affiliates, and/or BCBSA, except
for those disputes excepted from these MMDR procedures as set forth in the
License Agreements.
With the exception of punitive or treble damages, the Panel shall
have full authority to award the relief it deems appropriate to resolve the
parties' disputes, including monetary awards and injunctions, mandatory or
prohibitory. The Panel has no authority to award punitive or treble damages
except that the Panel may allocate or assess responsibility for punitive or
treble damages assessed by another tribunal. Subject to the above limitations,
the Panel may, by way of example, but not of limitation:
i. interpret or construe the meaning of any terms,
phrase or provision in any license between BCBSA
and a Plan or a Controlled Affiliate relating to
the use of the BLUE CROSS(R) or BLUE SHIELD(R)
service marks.
ii. determine whether BCBSA, a Plan or a Controlled
Affiliate has violated the terms or conditions of
any license between the BCBSA and a Plan or a
Controlled Affiliate relating to the use of the
BLUE CROSS(R) or BLUE SHIELD(R) service marks.
iii. decide challenges as to its own jurisdiction.
iv. issue such orders for interim relief as it deems
appropriate pending Hearing and Award in any
Arbitration.
It is understood that the Panel is expected to resolve
issues based on governing principles of law, preserving to the
maximum extent legally possible the continued integrity of the Licensed Marks
and the BLUE CROSS/BLUE SHIELD system. The Panel shall apply federal law to all
issues which, if asserted in the United States District Court, would give rise
to federal question jurisdiction, 28 U.S.C. ss. 1331. The Panel shall apply
Illinois law to all issues involving interpretation, performance or construction
of any License Agreement or Controlled Affiliate License Agreement unless the
agreement otherwise provides. As to other issues, the Panel shall choose the
applicable law based on conflicts of law principles of the State of Illinois.
F. Administrative Conference And Preliminary Arbitration
Hearing
Within ten (10) days of the Panel being selected, the Presiding
Arbitrator will schedule an Administrative Conference to discuss scheduling of
the Arbitration Hearing and any other matter appropriate to be considered
including: any written discovery in the form of requests for production of
documents or requests to admit facts; the identity of any witness whose
deposition a party may desire and a showing of exceptional good cause for the
taking of any such deposition; the desirability of bifurcation or other
separation of the issues; the need for and the type of record of conferences and
hearings, including the need for transcripts; the need for expert witnesses and
how expert testimony should be presented; the appropriateness of motions to
dismiss and/or for full or partial summary judgment; consideration of
stipulations; the desirability of presenting any direct testimony in writing;
and the necessity for any on-site inspection by the Panel.
G. Discovery
i. Requests for Production of Documents: All requests
for the production of documents must be served as
of the date of the Administrative Conference as
set forth in Paragraph 3.F., above. Within twenty
(20) days after receipt of a request for
documents, a party shall produce all relevant and
non-privileged documents to the requesting party.
In his or her discretion, the Presiding Arbitrator
may require the parties to provide lists in such
detail as is deemed appropriate of all documents
as to which privilege is claimed and may further
require in-camera inspection of the same.
ii. Requests for Admissions: Requests for Admissions
may be served up to 21 days prior to the
Arbitration Hearing. A party served with Requests
For Admissions must respond within twenty (20)
days of receipt of said request. The good faith
use of and response to Requests for Admissions is
encouraged, and the Panel shall have full
discretion, with reference to the Federal Rules of
Civil Procedure, in awarding appropriate sanctions
with respect to abuse of the procedure.
iii. Depositions As a general rule, the parties will
not be permitted to take deposition testimony for
discovery purposes. The Presiding Arbitrator, in
his or her sole discretion, shall have the
authority to permit a party to take such
deposition testimony upon a showing of exceptional
good cause, provided that no deposition, for
discovery purposes or otherwise, shall exceed
three (3) hours, excluding objections and colloquy
of counsel.
iv. Expert witness(es): If a party intends to present
the testimony of an expert witness during the oral
hearing, it shall provide all other parties with a
written statement setting forth the information
required to be provided by Fed. R. Civ. P.
26(b)(4)(A)(i) prior to the expiration of the
discovery period.
v. Discovery cut-off: The Presiding Arbitrator shall
determine the date on which the discovery period
will end, but the discovery period shall not
exceed forty-five (45) days from its commencement,
without the agreement of all parties.
vi. Additional discovery: Any additional discovery
will be at the discretion of the Presiding
Arbitrator. The Presiding Arbitrator is
authorized to resolve all discovery disputes,
which resolution will be binding on the parties
unless modified by the Arbitration Panel. If a
party refuses to comply with a decision resolving
a discovery dispute, the Panel, in keeping with
Fed. R. Civ. P. 37, may refuse to allow that party
to support or oppose designated claims or
defenses, prohibit that party from introducing
designated matters into evidence or, in extreme
cases, decide an issue submitted for resolution
adversely to that party.
H. Panel Suggested Settlement/Mediation
At any point during the proceedings, the Panel at the request of any
party or on its own initiative, may suggest that the parties explore settlement
and that they do so at or before the conclusion of the Arbitration Hearing, and
the Panel shall give such assistance in settlement negotiations as the parties
may request and the Panel may deem appropriate. Alternatively, the Panel may
direct the parties to endeavor to mediate their disputes as provided above, or
to explore a mini-trial proceeding, or to have an independent party render a
neutral evaluation of the parties' respective positions. The Panel shall enter
such sanctions as it deems appropriate with respect to any party failing to
pursue in good faith such Mediation or other alternate dispute resolution
methods.
I. Subpoenas On Third Parties
Pursuant to, and consistent with, the Federal Arbitration Act, 9
U.S.C. ss. 9 et seq., a party may request the issuance of a subpoena on a third
party, to compel testimony or documents, and, if good and sufficient cause is
shown, the Panel shall issue such a subpoena.
J. Arbitration Hearing
An Arbitration Hearing will be held within thirty (30) days after
the Administrative Conference if no discovery is taken, or within thirty (30)
days after the close of discovery, unless all parties and the Panel agree to
extend the Arbitration Hearing date, or unless the parties agree in writing to
waive the Arbitration Hearing. The parties may mutually agree on the location of
the Arbitration Hearing. If the parties fail to agree, the Arbitration Hearing
shall be held in Chicago, Illinois, or at such other location determined by the
Presiding Arbitrator to be most convenient to the participants. The Panel will
determine the date(s) and time(s) of the Arbitration Hearing(s) after
consultation with all parties and shall provide reasonable notice thereof to all
parties or their representatives.
K. Arbitration Hearing Memoranda
Twenty (20) days prior to the Arbitration Hearing, each party shall
submit to the other party (or parties) and to the Panel an Arbitration Hearing
Memorandum which sets forth the applicable law and any argument as to any
relevant issue. The Arbitration Hearing Memorandum will supplement, and not
repeat, the allegations, information and documents contained in or with the
Complaint, Answer, Counterclaim and Reply, if any. Ten (10) days prior to the
Arbitration Hearing, each party may submit to the other party (or parties) and
to the Panel a Response Arbitration Hearing Memorandum which sets forth any
response to another party's Arbitration Hearing Memorandum.
L. Notice For Testimony
Ten (10) days prior to the Arbitration Hearing, any party may serve
a Notice on any other party (or parties) requesting the attendance at the
Arbitration Hearing of any officer, employee or director of the other party (or
parties) for the purpose of providing noncumulative testimony. If a party fails
to produce one of its officers, employees or directors whose noncumulative
testimony during the Arbitration Hearing is reasonably requested by an adverse
party, the Panel may refuse to allow that party to support or oppose designated
claims or defenses, prohibit that party from introducing designated matters into
evidence or, in extreme cases, decide an issue submitted for mandatory dispute
resolution adversely to that party. This Rule may not be used for the purpose of
burdening or harassing any party, and the Presiding Arbitrator may impose such
orders as are appropriate so as to prevent or remedy any such burden or
harassment.
M. Arbitration Hearing Procedures
i. Attendance at Arbitration Hearing: Any person
having a direct interest in the proceeding is
entitled to attend the Arbitration Hearing. The
Presiding Arbitrator shall otherwise have the
power to require the exclusion of any witness,
other than a party or other essential person,
during the testimony of any other witness. It
shall be discretionary with the Presiding
Arbitrator to determine the propriety of the
attendance of any other person.
ii. Confidentiality: The Panel and all parties shall
maintain the privacy of the Arbitration
Proceeding. The parties and the Panel shall treat
the Arbitration Hearing and any discovery or other
proceedings or events related thereto, including
any award resulting therefrom, as confidential
except as otherwise necessary in connection with a
judicial challenge to or enforcement of an award
or unless otherwise required by law.
iii. Stenographic Record: Any party, or if the parties
do not object, the Panel, may request that a
stenographic or other record be made of any
Arbitration Hearing or portion thereof. The costs
of the recording and/or of preparing the
transcript shall be borne by the requesting party
and by any party who receives a copy thereof. If
the Panel requests a recording and/or a
transcript, the costs thereof shall be borne
equally by the parties.
iv. Oaths: The Panel may require witnesses to testify
under oath or affirmation administered by any duly
qualified person and, if requested by any party,
shall do so.
v. Order of Arbitration Hearing: An Arbitration
Hearing shall be opened by the recording of the
date, time, and place of the Arbitration Hearing,
and the presence of the Panel, the parties, and
their representatives, if any. The Panel may, at
the beginning of the Arbitration Hearing, ask for
statements clarifying the issues involved.
Unless otherwise agreed, the complaining party (or
parties) shall then present evidence to support
their claim(s). The respondent(s) shall then
present evidence supporting their defenses and
Counterclaims, if any. The complaining party (or
parties) shall then present evidence supporting
defenses to the Counterclaims, if any, and
rebuttal.
Witnesses for each party shall submit to questions
by adverse parties and/or the Panel.
The Panel has the discretion to vary these
procedures, but shall afford a full and equal
opportunity to all parties for the presentation of
any material and relevant evidence .
vi. Evidence: The parties may offer such evidence as
is relevant and material to the dispute and shall
produce such evidence as the Panel may deem
necessary to an understanding and resolution of
the dispute. Unless good cause is shown, as
determined by the Panel or agreed to by all other
parties, no party shall be permitted to offer
evidence at the Arbitration Hearing which was not
disclosed prior to the Arbitration Hearing by that
party. The Panel may receive and consider the
evidence of witnesses by affidavit upon such terms
as the Panel deems appropriate.
The Panel shall be the judge of the relevance and
materiality of the evidence offered, and
conformity to legal rules of evidence, other than
enforcement of the attorney-client privilege and
the work product protection, shall not be
necessary. The Federal Rules of Evidence shall be
considered by the Panel in conducting the
Arbitration Hearing but those rules shall not be
controlling. All evidence shall be taken in the
presence of the Panel and all of the parties,
except where any party is in default or has waived
the right to be present.
Settlement offers by any party in connection with
Mediation or MDR proceedings, decisions or
recommendations of the selected mediators, and a
party's position papers or statements furnished to
the selected mediators shall not be admissible
evidence or considered by the Panel without the
consent of all parties.
vii. Closing of Arbitration Hearing: The Presiding
Arbitrator shall specifically inquire of all
parties whether they have any further proofs to
offer or witnesses to be heard. Upon receiving
negative replies or if he or she is satisfied that
the record is complete, the Presiding Arbitrator
shall declare the Arbitration Hearing closed with
an appropriate notation made on the record.
Subject to being reopened as provided below, the
time within which the Panel is required to make
the award shall commence to run, in the absence of
contrary agreement by the parties, upon the
closing of the Arbitration Hearing.
With respect to complex disputes, the Panel may,
in its sole discretion, defer the closing of the
Arbitration Hearing for a period of up to thirty
(30) days after the presentation of proofs in
order to permit the parties to submit post-hearing
briefs and argument, as the Panel deems
appropriate, prior to making an award.
For good cause, the Arbitration Hearing may be
reopened for up to thirty (30) days on the Panel's
initiative, or upon application of a party, at any
time before the award is made
. N. Awards
An Award must be in writing and shall be made promptly by the Panel
and, unless otherwise agreed by the parties or specified by law, no later than
thirty (30) days from the date of closing the Arbitration Hearing. If all
parties so request, the Award shall contain findings of fact and conclusions of
law. The Award, and all other rulings and determinations by the Panel, may be by
a majority vote.
Parties shall accept as legal delivery of the Award the placing of
the Award or a true copy thereof in the mail addressed to a party or its
representative at its last known address or personal service of the Award on a
party or its representative.
Awards are binding only on the parties to the Arbitration and are
not binding on any non-parties to the Arbitration and may not be used or cited
as precedent in any other proceeding.
After the expiration of twenty (20) days from initial delivery, the
Award (with corrections, if any) shall be final and binding on the parties, and
the parties shall undertake to carry out the Award without delay.
Proceedings to confirm, modify or vacate an Award shall be conducted
in conformity with and controlled by the Federal Arbitration Act. 9 U.S.C.ss.1,
et seq.
O. Return Of Documents
Within sixty (60) days after the Award and the conclusion of any
judicial proceedings with respect thereto, each party and the Panel shall return
any documents produced by any other party, including all copies thereof. If a
party receives a discovery request in any other proceeding which would require
it to produce any documents produced to it by any other party in a proceeding
hereunder, it shall not produce such documents without first notifying the
producing party and giving said party reasonable time to respond, if
appropriate, to the discovery request.
4. Miscellaneous
A. Expedited Procedures
Any party to a Mediation may direct a request for an expedited
Mediation Hearing to the Chairman of the Mediation Committee, to the selected
Mediators, and to all other parties at any time. The Chairman of the Mediation
Committee, or at his or her direction, the then selected Mediators, shall grant
any request which is supported by good and sufficient reasons. If such a request
is granted, the Mediation shall be completed within as short a period as
practicable, as determined by the Chairman of the Mediation Committee or, at his
or her direction, the then selected Mediators.
Any party to an Arbitration may direct a request for expedited
proceedings to the Administrator, to the Panel, and to all other parties at any
time. The Administrator, or the Presiding Arbitrator if the Panel has been
selected, shall grant any such request which is supported by good and sufficient
reasons. If such a request is granted, the Arbitration shall be completed within
as short a time as practicable, as determined by the Administrator and/or the
Presiding Arbitrator.
B. Temporary Or Preliminary Injunctive Relief
Any party may seek temporary or preliminary injunctive relief with
the filing of a Complaint or at any time thereafter. If such relief is sought
prior to the time that an Arbitration Panel has been selected, then the
Administrator shall select a single Arbitrator who is a lawyer who has no
interest in the subject matter of the dispute, and no connection to any of the
parties, to hear and determine the request for temporary or preliminary
injunction. If such relief is sought after the time that an Arbitration Panel
has been selected, then the Arbitration Panel will hear and determine the
request. The request for temporary or preliminary injunctive relief will be
determined with reference to the temporary or preliminary injunction standards
set forth in Fed. R. Civ. P. 65.
C. Defaults And Proceedings In The Absence Of A Party
Whenever a party fails to comply with the MDR Rules in a manner
deemed material by the Panel, the Panel shall fix a reasonable time for
compliance and, if the party does not comply within said period, the Panel may
enter an Order of default or afford such other relief as it deems appropriate.
Arbitration may proceed in the event of a default or in the absence of any party
who, after due notice, fails to be present or fails to obtain an extension. An
Award shall not be made solely on the default or absence of a party, but the
Panel shall require the party who is present to submit such evidence as the
Panel may require for the making of findings, determinations, conclusions, and
Awards.
D. Notice
Each party shall be deemed to have consented that any papers,
notices, or process necessary or proper for the initiation or continuation of a
proceeding under these rules or for any court action in connection therewith may
be served on a party by mail addressed to the party or its representative at its
last known address or by personal service, in or outside the state where the MDR
proceeding is to be held.
The Corporate Secretary and the parties may also use facsimile
transmission, telex, telegram, or other written forms of electronic
communication to give the notices required by these rules.
E. Expenses
The expenses of witnesses shall be paid by the party causing or
requesting the appearance of such witnesses. All expenses of the MDR proceeding,
including compensation, required travel and other reasonable expenses of the
Panel, and the cost of any proof produced at the direct request of the Panel,
shall be borne equally by the parties and shall be paid periodically on a timely
basis, unless they agree otherwise or unless the Panel in the Award assesses
such expenses, or any part thereof against any party (or parties). In
exceptional cases, the Panel may award reasonable attorneys' fees as an item of
expense, and the Panel shall promptly determine the amount of such fees based on
affidavits or such other proofs as the Panel deems sufficient.
F. Disqualification Or Disability Of A Panel Member
In the event that any Arbitrator of a Panel with more than one
Arbitrator should become disqualified, resign, die, or refuse or be unable to
perform or discharge his or her duties after the commencement of MDR but prior
to the rendition of an Award, and the parties are unable to agree upon a
replacement, the remaining Panel member(s):
i. shall designate a replacement, subject to the
right of any party to challenge such replacement for
cause.
ii. shall decide the extent to which previously held
hearings shall be repeated.
If the remaining Panel members consider the proceedings to have
progressed to a stage as to make replacement impracticable, the parties may
agree, as an alternative to the recommencement of the Mandatory Dispute
Resolution process, to resolution of the dispute by the remaining Panel members.
In the event that a single Arbitrator should become disqualified,
resign, die, or refuse or be unable to perform or discharge his or her duties
after the commencement of MDR but prior to the rendition of an Award, and the
parties are unable to agree upon a replacement, the Administrator shall appoint
a successor, subject to the right of any party to challenge such successor for
cause, and the successor shall decide the extent to which previously held
proceedings shall be repeated.
G. Amendments
These MMDR Rules may be altered or amended from time to time by the
affirmative vote of fifty-one (51) percent of the Plans and fifty-one (51)
percent of the total then current weighted vote of all the Plans.
H. Extensions of Time
Any time limit set forth in these Rules may be extended upon
agreement of the parties and approval of: (i) the Chairman of the Mediation
Committee if the proceeding is then in Mediation; (ii) the Administrator if the
proceeding is in Arbitration, but no Arbitration Panel has been selected; or
(iii) the Arbitration Panel, if the proceeding is in Arbitration and the
Arbitration Panel has been selected.
I. Intervention
The Plans, their Controlled Affiliates, and BCBSA, to the extent
subject to MMDR pursuant to their License Agreements, shall have the right to
move to intervene in any pending Arbitration. A written motion for intervention
shall be made to: (i) the Administrator, if the proceeding is in Arbitration,
but no Arbitration Panel has been selected; or (ii) the Arbitration Panel, if
the proceeding is in Arbitration and the Arbitration Panel has been selected.
The written motion for intervention shall be delivered to the BCBSA Corporate
Secretary (which shall also constitute service on the BCBSA if it is a
respondent) and to any Plan(s) and/or Controlled Affiliate(s) which are parties
to the proceeding. Any party to the proceeding can submit written objections to
the motion to intervene. The motion for intervention shall be granted upon good
cause shown. Intervention also may be allowed by stipulation of the parties to
the Arbitration proceeding. Intervention shall be allowed upon such terms as the
Arbitration Panel decides.
J. BCBSA Assistance In Resolution of Disputes
The resources and personnel of the BCBSA may be requested by any
member Plan at any time to try to resolve disputes with another Plan.
K. Neutral Evaluation
The parties can voluntarily agree at any time to have an independent
party render a neutral evaluation of the parties' respective positions.
EXHIBIT 5-A
MEDIATION COMMITTEE
REPORTS TO: Board of Directors
CHARGE: 1. Develop and implement processes for resolving misunderstandings
or disagreements between Plans or between Plans and
the Association under the following circumstances:
a. Matters at issue regarding relationships between
Plans or between Plans and the Association.
b. Matters at issue regarding relationships between
Plans or between Plans and the Association.
c. Matters at issue under the Inter-Plan Bank,
Reciprocity, and Transfer Programs.
d. Matters at issue regarding contractor selection or
performance under the Medicare Part A Program.
2. Determination of equalization allowances and/or cost allowances
under FEP shall not be considered by this Committee.
MEMBERSHIP: Six to Eight
STAFF: Senior Vice President and General Counsel
BLUE SHIELD LICENSE AGREEMENT
This agreement by and between Blue Cross and Blue Shield Association
("BCBSA") and The Blue Shield Plan, known as ______________ (the "Plan").
Preamble
WHEREAS, the Plan and/or its predecessor(s) in interest
(collectively the "Plan") had the right to use the BLUE SHIELD and BLUE SHIELD
Design service marks (collectively the "Licensed Marks") for health care plans
in its service area, which was essentially local in nature;
WHEREAS, the Plan was desirous of assuring nationwide protection of
the Licensed Marks, maintaining uniform quality controls among Plans,
facilitating the provision of cost effective health care services to the public
and otherwise benefiting the public;
WHEREAS, to better attain such ends, the Plan and the predecessor of
BCBSA executed the Agreement(s) Relating to the Collective Service ▇▇▇▇ "Blue
Shield"; and
WHEREAS, BCBSA and the Plan desire to supercede said Agreement(s) to
reflect their current practices and to assure the continued integrity of the
Licensed Marks and of the BLUE SHIELD system;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
Agreement
1. BCBSA hereby grants to the Plan, upon the terms and conditions of
this License Agreement, the right to use BLUE SHIELD in its trade and/or
corporate name (the "Licensed Name"), and the right to use the Licensed Marks,
in the sale, marketing and administration of health care plans and related
services in the Service Area set forth and defined in paragraph 5 below. As used
herein, health care plans and related services shall include acting as a
nonprofit health care plan, a for-profit health care plan, or mutual health
insurer operating on a not-for-profit or for-profit basis, under state law;
financing access to health care services; providing health care management and
administration; administering, but not underwriting, non-health portions of
Worker's Compensation insurance; and delivering health care services.
2. The Plan may use the Licensed Marks and Name in connection with
the offering of: a) health care plans and related services in the Service Area
through Controlled Affiliates, provided that each such affiliate is separately
licensed to use the Licensed Marks and Name under the terms and conditions
contained in the Agreement attached as Exhibit 1 hereto (the "Controlled
Affiliate License Agreement"); and: b) insurance coverages offered by life
insurers under the applicable law in the Service Area, other than those which
the Plan may offer in its own name, provided through Controlled Affiliates,
provided that each such affiliate is separately licensed to use the Licensed
Marks and Name under the terms and conditions contained in the Agreement
attached as Exhibit 1A hereto (the "Controlled Affiliate License Agreement
Applicable to Life Insurance Companies") and further provided that the offering
of such services does not and will not dilute or tarnish the unique value of the
Licensed Marks and Name; and c) administration and underwriting of Workers'
Compensation Insurance Controlled Affiliates, provided that each such Affiliate
is separately licensed to use the Licensed Marks and Name under the terms and
conditions contained in the Agreement attached as Exhibit 1 hereto (the
"Controlled Affiliate License.") With respect to any HMO previously sublicensed
as provided in a License Addendum between BCBSA and the Plan, the Plan shall
have one (1) year from the date hereof to obtain execution of the direct license
required herein. As used herein, a Controlled Affiliate is defined as an entity
organized and operated in such a manner that it is subject to the bona fide
control of a Plan or Plans. Absent written approval by BCBSA of an alternative
method of control, bona fide control shall mean:
A. The legal authority, directly or indirectly through
wholly-owned subsidiaries: (a) to select members of
the Controlled Affiliate's governing body having not
less than 51% voting control thereof; (b) to exercise
operational control with respect to the governance
thereof; and (c) to prevent any change in its articles
of incorporation, bylaws or other governing documents
deemed inappropriate. In addition, a Plan or Plans
shall own at least 51% of any for-profit Controlled
Affiliate; or
B. The legal authority directly or indirectly through
wholly-owned subsidiaries (a) to select members of the
Affiliate's governing body having not less than 50%
voting control; (b) the legal ability to prevent any
change in the articles of incorporation, bylaws or
other establishing or governing documents of the
Affiliate with which it does not concur; (c) at least
equal control over the operations of the Affiliate;
and (d) to concur before the Affiliate can:
Amended as of November 16, 1995
-2-
1. Change its legal and/or trade name;
2. Change the geographic area in which it operates;
3. Change the types of businesses in which it engages;
4. Take any action that Plan or BCBSA reasonably believes will adversely affect
the Licensed Marks or Names.
Amended as of November 17, 1994
-2a-
3. The Plan may engage in activities not required by BCBSA to be
directly licensed through Controlled Affiliates and may indicate its
relationship thereto by use of the Licensed Name as a tag line, provided that
the engaging in such activities does not and will not dilute or tarnish the
unique value of the Licensed Marks and Name and further provided that such tag
line use is not in a manner likely to cause confusion or mistake. Consistent
with the avoidance of confusion or mistake, each tag line use of the Plan's
Licensed Name: (a) shall be in the style and manner specified by BCBSA from
time-to-time; (b) shall not include the design service marks; (c) shall not be
in a manner to import more than the Plan's mere ownership of the affiliate; and
(d) shall be restricted to the Service Area. No rights are hereby created in any
Controlled Affiliate to use the Licensed Name in its own name or otherwise. At
least annually, the Plan shall provide BCBSA with representative samples of each
such use of its Licensed Name pursuant to the foregoing conditions.
4. The Plan recognizes the importance of a comprehensive national
network of independent BCBSA licensees which are committed to strengthening the
Licensed Marks and Name. The Plan further recognizes that its actions within its
Service Area may affect the value of the Licensed Marks and Name nationwide. The
Plan agrees (a) to maintain in good standing its membership in BCBSA; (b)
promptly to pay its dues to BCBSA, said dues to represent the royalties for this
License Agreement; (c) materially to comply with all applicable laws; (d) to
comply with the Membership Standards of BCBSA, a current copy of which is
attached as Exhibit 2 hereto; and (e) reasonably to permit BCBSA, upon a
written, good faith request and during reasonable business hours, to inspect the
Plan's books and records necessary to ascertain compliance herewith. As to other
Plans and third parties, BCBSA shall maintain the confidentiality of all
documents and information furnished by the Plan pursuant hereto, or pursuant to
the Membership Standards, and clearly designated by the Plan as containing
proprietary information of the Plan.
5. The rights hereby granted are exclusive to the Plan within the
geographical area(s) served by the Plan on June 30, 1972, and/or as to which the
Plan has been granted a subsequent license, which is hereby defined as the
"Service Area," except that BCBSA reserves the right to use the Licensed Marks
in said Service Area, and except to the extent that said Service Area may
overlap areas served by one or more other licensed Blue Shield Plans as of said
date or subsequent license, as to which overlapping areas the rights hereby
granted are nonexclusive as to such other Plan or Plans only.
Amended as of September 19, 1996
-3-
6. Except as expressly provided by BCBSA with respect to National
Accounts, Government Programs and certain other necessary and collateral uses,
the current rules and regulations governing which are attached as Exhibit 3 and
Exhibit 4 hereto, or as expressly provided herein, the Plan may not use the
Licensed Marks and Name outside the Service Area or in connection with other
goods and services, nor may the Plan use the Licensed Marks or Name in a manner
which is intended to transfer in the Service Area the goodwill associated
therewith to another ▇▇▇▇ or name. Nothing herein shall be construed to prevent
the Plan from engaging in lawful activity anywhere under other marks and names
not confusingly similar to the Licensed Marks and Name, provided that engaging
in such activity does and will not dilute or tarnish the unique value of the
Licensed Marks and Name.
7. The Plan agrees that it will display the Licensed Marks and
Name only in such form, style and manner as shall be specifically prescribed by
BCBSA from time-to-time in regulations of general application in order to
prevent impairment of the distinctiveness of the Licensed Marks and Name and the
goodwill pertaining thereto. The Plan shall cause to appear on all materials on
or in connection with which the Licensed Marks or Name are used such legends,
markings and notices as BCBSA may reasonably request in order to give
appropriate notice of service ▇▇▇▇ or other proprietary rights therein or
pertaining thereto.
8. BCBSA agrees that: (a) it will not grant any other license
effective during the term of this License Agreement for the use of the Licensed
Marks or Name which is inconsistent with the rights granted to the Plan
hereunder; and (b) it will not itself use the Licensed Marks in derogation of
the rights of the Plan or in a manner to deprive the Plan of the full benefits
of this License Agreement. The Plan agrees that it will not attack the title of
BCBSA in and to the Licensed Marks or Name or attack the validity of the
Licensed Marks or of this License Agreement. The Plan further agrees that all
use by it of the Licensed Marks and Name or any similar ▇▇▇▇ or name shall inure
to the benefit of BCBSA, and the Plan shall cooperate with BCBSA in effectuating
the assignment to BCBSA of any service ▇▇▇▇ or trademark registrations of the
Licensed Marks or any similar ▇▇▇▇ or name held by the Plan or a Controlled
Affiliate of the Plan, all or any portion of which registration consists of the
Licensed Marks.
-4-
9. (a). Should the Plan fail to comply with the provisions of
paragraphs 2-4, 6, 7 and/or 12, and not cure such failure within thirty (30)
days of receiving written notice thereof (or commence curing such failure within
such thirty day period and continue diligent efforts to complete the curing of
such failure if such curing cannot reasonably be completed within such thirty
day period), BCBSA shall have the right to issue a notice that the Plan is in a
state of noncompliance. Except as to the termination of a Plan's License
Agreement or the merger of two or more Plans, disputes as to noncompliance, and
all other disputes between or among BCBSA, the Plan, other Plans and/or
Controlled Affiliates, shall be submitted promptly to mediation and mandatory
dispute resolution pursuant to the rules and regulations of BCBSA, a current
copy of which is attached as Exhibit 5 hereto, and shall be timely presented and
resolved. The mandatory dispute resolution panel shall have authority to issue
orders for specific performance and assess monetary penalties. If a state of
noncompliance as aforesaid is undisputed by the Plan or is found to exist by a
mandatory dispute resolution panel and is uncured as provided above, BCBSA shall
have the right to seek judicial enforcement of the License Agreement and/or to
issue a notice of termination thereof. Except, however, as provided in paragraph
15(a)(i)-(viii) below, no Plan's license to use the Licensed Marks and Name may
be finally terminated for any reason without the affirmative vote of
three-fourths of the Plans and three-fourths of the total then current weighted
vote of all the Plans.
(b). Notwithstandng any other provision of this
License Agreement, a Plan's license to use the Licensed Marks and Name may be
forthwith terminated by the affirmative vote of three-fourths of the Plans and
three-fourths of the total then current weighted vote of all the Plans at a
special meeting expressly called by BCBSA for the purpose on ten (10) days
written notice for: (i) failure to comply with any minimum capital or liquidity
requirement under the Membership Standard on Financial Responsibility; or (ii)
impending financial insolvency; or (iii) such other reason as is determined in
good faith immediately and irreparably to threaten the integrity and reputation
of BCBSA, the Plans and/or the Licensed Marks.
(c). To the extent not otherwise provided therein,
neither: (i) the Membership Standards; nor (ii) the rules and regulations
governing National Accounts, Government Programs and certain other uses; nor
(iii) the rules and regulations governing mediation and mandatory dispute
resolution, may be amended unless and until each such amendment is first adopted
by the affirmative vote of three-fourths of the Plans and of three-fourths of
the total then current weighted vote of all the Plans.
Amended as of November 17, 1994
-5-
9. (d). The Plan may operate as a for-profit company on the
following conditions:
(i) The Plan shall discharge all responsibilities which it has to
the Association and to other Plans by virtue of this Agreement and the Plan's
membership in BCBSA.
(ii) The Plan shall not use the licensed Marks and Name, or any
derivative thereof, as part of its legal name or any symbol used to identify the
Plan in any securities market. The Plan shall use the licensed Marks and Name as
part of its trade name within its service area for the sale, marketing and
administration of health care and related services in the service area.
(iii) The Plan's license to use the Licensed Marks and Name shall
automatically terminate effective ten business days after: (a) any Person,
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of securities representing 20% or more of the voting power of
the Plan, unless such Person shall cease to be such a Beneficial Owner prior to
such automatic termination becoming effective; (b) individuals who at the time
the Plan went public constituted the Board of Directors of the Plan (together
with any new directors whose election to the Board was approved by a vote of 2/3
of the directors then still in office who were directors at the time the Plan
went public or whose election or nomination was previously so approved) (the
"Continuing Directors") cease for any reason to constitute a majority of the
Board of Directors; or (c) the Plan consolidates with or merges with or into any
person or conveys, assigns, transfers or sells all or substantially all of its
assets to any person other than a merger in which the Plan is the surviving
entity and immediately after which merger, no person or group beneficially owns
securities representing 20% or more of the voting power of the Plan: provided
that, if requested by the affected Plan prior to such automatic termination
becoming effective, the provisions of this paragraph 9(d)(iii) may be waived or
made conditional, in whole or in part, upon the affirmative vote of a majority
of the disinterested Plans and a majority of the total then current weighted
vote of the disinterested Plans.
In the event that the Plan's license to use the Licensed Marks and Name is
terminated pursuant to this Paragraph 9(d)(iii), the license may be reinstated
by BCBSA if, within 30 days of the date of such termination, the Plan
demonstrates that the Person referred to in the preceding sentence is no longer
the Beneficial Owner of securities representing 20% or more of the voting power
of the Plan.
Amended as of September 29, 1994
-5a-
The Plan's license to use the Licensed Marks and Name may be terminated if any
Person, together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of securities representing 5% or more of the voting power of
the Plan and such Person's Beneficial Ownership is deemed in BCBSA's absolute
discretion, detrimental to the best interest of the Name and Marks; provided,
however that such termination shall become effective only upon the affirmative
vote of three-fourths of the disinterested Plans and three-fourths of the total
then current weighted vote of the disinterested Plans.
(iv) For purposes of paragraph 9(d)(iii), the following definitions
shall apply:
(a) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended and in
effect on November 17, 1993 (the "Exchange Act").
(b) A Person shall be deemed the "Beneficial Owner" of
and shall be deemed to "beneficially own" any
securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly
or indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to
acquire (whether such right is exercisable
immediately or only after the passage of time)
pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion
rights, exchange rights, warrants or options, or
otherwise; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or
understanding to vote such security (1) arises
solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent
solicitation made pursuant to, and in accordance
with, the applicable rules and regulations
promulgated under the Exchange Act and (2) is not
also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person (or any of
such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (other than
customary agreements with and between
Amended as of September 29, 1994
-5b-
underwriters and selling group members with respect
to a bona fide public offering of securities)
relating to the acquisition, holding, voting (except
to the extent contemplated by the proviso to
(b)(ii)(B) above) or disposing of any securities of
the Plan.
Notwithstanding anything in this definition of
Beneficial Ownership to the contrary, the phrase
"then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the
Plan, shall mean the number of such securities then
issued and outstanding together with the number of
such securities not then actually issued and
outstanding which such Person would be deemed to own
beneficially hereunder.
(c) "Person" shall mean any individual, firm,
partnership, corporation, trust, association, joint
venture or other entity, and shall include any
successor (by merger or otherwise) or such entity.
Amended as of September 29, 1994
-5c-
10. This License Agreement shall remain in effect: (a) until
terminated as provided herein; or (b) until this and all such other License
Agreements are terminated by the affirmative vote of three-fourths of the Plans
and three-fourths of the total then current weighted vote of all the Plans; or
(c) until terminated by the Plan upon six (6) months written notice to BCBSA.
11. Except as otherwise provided in paragraph 15 below or by the
affirmative vote of three-fourths of the Plans and three-fourths of the total
then current weighted vote of all the Plans, or unless this and all such other
License Agreements are simultaneously terminated by force of law, the
termination of this License Agreement for any reason whatsoever shall cause the
reversion to BCBSA of all rights in and to the Licensed Marks and Name, and the
Plan agrees that it will promptly discontinue all use of the Licensed Marks and
Name, will not use them thereafter, and will promptly, upon written notice from
BCBSA, change its corporate name so as to eliminate the Licensed Name therefrom.
12. The license hereby granted to Plan to use the Licensed Marks and
Name is and shall be personal to the Plan so licensed and shall not be
assignable by any act of the Plan, directly or indirectly, without the written
consent of BCBSA. Said license shall not be assignable by operation of law, nor
shall Plan mortgage or part with possession or control of this license or any
right hereunder, and the Plan shall have no right to grant any sublicense to use
the Licensed Marks and Name.
13. BCBSA shall maintain appropriate service ▇▇▇▇ registrations of
the Licensed Marks and BCBSA shall take such lawful steps and proceedings as may
be necessary or proper to prevent use of the Licensed Marks by any person who is
not authorized to use the same. Any actions or proceedings undertaken by BCBSA
under the provisions of this paragraph shall be at BCBSA's sole cost and
expense. BCBSA shall have the sole right to determine whether or not any legal
action shall be taken on account of unauthorized use of the Licensed Marks, such
right not to be unreasonably exercised. The Plan shall report any unlawful usage
of the Licensed Marks to BCBSA in writing and agrees, free of charge, to
cooperate fully with BCBSA's program of enforcing and protecting the service
▇▇▇▇ rights, trade name rights and other rights in the Licensed Marks.
-6-
14. The Plan hereby agrees to save, defend, indemnify and hold BCBSA
and any other Plan(s) harmless from and against all claims, damages, liabilities
and costs of every kind, nature and description which may arise exclusively and
directly as a result of the activities of the Plan. BCBSA hereby agrees to save,
defend, indemnify and hold the Plan and any other Plan(s) harmless from and
against all claims, damages, liabilities and costs of every kind, nature and
description which may arise exclusively and directly as a result of the
activities of BCBSA.
15. (a). This Agreement shall automatically terminate upon the
occurrence of any of the following events: (i) a voluntary petition shall be
filed by the Plan or by BCBSA seeking bankruptcy, reorganization, arrangement
with creditors or other relief under the bankruptcy laws of the United States or
any other law governing insolvency or debtor relief, or (ii) an involuntary
petition or proceeding shall be filed against the Plan or BCBSA seeking
bankruptcy, reorganization, arrangement with creditors or other relief under the
bankruptcy laws of the United States or any other law governing insolvency or
debtor relief and such petition or proceeding is consented to or acquiesced in
by the Plan or BCBSA or is not dismissed within sixty (60) days of the date upon
which the petition or other document commencing the proceeding is served upon
the Plan or BCBSA respectively, or(iii) an order for relief is entered against
the Plan or BCBSA in any case under the bankruptcy laws of the United States, or
the Plan or BCBSA is adjudged bankrupt or insolvent (as that term is defined in
the Uniform Commercial Code as enacted in the state of Illinois) by any court of
competent jurisdiction, or (iv) the Plan or BCBSA makes a general assignment of
its assets for the benefit of creditors, or (v) the Department of Insurance or
other regulatory agency assumes control of the Plan or delinquency proceedings
(voluntary or involuntary) are instituted, or (vi) an action is brought by the
Plan or BCBSA seeking its dissolution or liquidation of its assets or seeking
the appointment of a trustee, interim trustee, receiver or other custodian for
any of its property or business, or (vii) an action is instituted against the
Plan or BCBSA seeking its dissolution or liquidation of its assets or seeking
appointment of a trustee, interim trustee, receiver or other custodian for any
of its property or business and such action is consented to or acquiesced in by
the Plan or BCBSA or is not dismissed within sixty (60) days of the date upon
which the pleading or other document commencing the action is served upon the
Plan or BCBSA respectively, or(viii) a trustee, interim trustee, receiver or
other custodian for any of the Plan's or BCBSA's property or business is
appointed, or (ix) the Plan shall fail to pay its dues and shall not cure such
failure within thirty (30) days of receiving written notice thereof.
Amended November 21, 1996
-7-
(b). BCBSA, or the Plans (as provided and in addition to the rights
conferred in Paragraph 10(b) above), may terminate this Agreement immediately
upon written notice upon the occurrence of either of the following events: (a)
the Plan or BCBSA becomes insolvent (as that term is defined in the Uniform
Commercial Code enacted in the state of Illinois), or (b) any final judgment
against the Plan or BCBSA remains unsatisfied or unbonded of record for a period
of sixty (60) days or longer.
(c). If this License Agreement is terminated as to BCBSA for any
reason stated in subparagraphs 15(a) and (b) above, the ownership of the
Licensed Marks shall revert to each of the Plans.
(d). Upon termination of this License Agreement or any Controlled
Affiliate License Agreement of a Larger Affiliate, as defined in Exhibit 1 to
this License Agreement:
(i) The terminated entity shall send a
notice through the U.S. mails, with
first class postage affixed, to all
individual and group customers,
providers, brokers and agents of
products or services sold, marketed,
underwritten or administered by the
terminated entity or its Controlled
Affiliates under the Licensed Marks and
Name. The form and content of the
notice shall be specified by BCBSA and
shall, at a minimum, notify the
recipient of the termination of the
license, the consequences thereof, and
instructions for obtaining alternate
products or services licensed by BCBSA.
This notice shall be mailed within 15
days after termination or, if
termination is pursuant to paragraph
10(d) of this Agreement, within 15 days
after the written notice to BCBSA
described in paragraph 10(d).
(ii) The terminated entity shall deliver to
BCBSA within five days of a request by
BCBSA a listing of national accounts in
which the terminated entity is involved
(in a Control, Participating or
Servicing capacity), identifying the
national account and the terminated
entity's role therein. For those
accounts where the terminated entity is
the Control Plan, the Plan must also
indicate the Participating and
Servicing Plans in the national account
syndicate.
Amended as of September 19, 1996
-8-
(iii) Unless the cause of termination
is an event stated in paragraph
15(a) or (b) above respecting
BCBSA, the Plan and its Licensed
Controlled Affiliates shall be
jointly liable for payment to
BCBSA of an amount equal to $25
multiplied by the number of
Licensed Enrollees of the
terminated entity and its
Licensed Controlled Affiliates;
provided that if any other Plan
is permitted by BCBSA to use
marks or names licensed by BCBSA
in the Service Area established
by this Agreement, the payment
shall be multiplied by a
fraction, the numerator of which
is the number of Licensed
Enrollees of the terminated
entity and its Licensed
Controlled Affiliates and the
denominator of which is the total
number of Licensed Enrollees in
the Service Area. Licensed
Enrollee means each and every
person and covered dependent who
is enrolled as an individual or
member of a group receiving
products or services sold,
marketed or administered under
marks or names licensed by BCBSA
as determined at the earlier of
(a) the end of the last fiscal
year of the terminated entity
which ended prior to termination
or (b) the fiscal year which
ended before any transactions
causing the termination began.
Notwithstanding the foregoing,
the amount payable pursuant to
this subparagraph (d)(iii) shall
be due only to the extent that,
in BCBSA's opinion, it does not
cause the net worth of the Plan
to fall below 100% of the capital
benchmark formula or its
equivalent under any successor
formula, as set forth in the
applicable financial
responsibility standards
established by BCBSA, measured as
of the date of termination and
adjusted for the value of any
transactions not made in the
ordinary course of business.
(iv) BCBSA shall have the right to
audit the books and records of
the terminated entity and its
Licensed Controlled Affiliates to
verify compliance with this
paragraph 15(d).
Amended as of September 19, 1996
-8a-
(v) As to a breach of 15 (d) (i),
(ii), (iii) or (iv), the parties
agree that the obligations are
immediately enforceable in a
court of competent jurisdiction.
As to a breach of 15 (d) (i),
(ii) or (iv) by the Plan, the
parties agree there is no
adequate remedy at law and BCBSA
is entitled to obtain specific
performance.
(e). BCBSA shall be entitled to enjoin the Plan or any related
party in a court of competent jurisdiction from entry into any transaction which
would result in a termination of this License Agreement unless the License
Agreement has been terminated pursuant to paragraph 10 (d) of this Agreement
upon the required six (6) month written notice.
(f). BCBSA acknowledges that it is not the owner
of assets of the Plan.
16. This Agreement supersedes any and all other agreements between
the parties with respect to the subject matter herein, and contains all of the
covenants and agreements of the parties as to the licensing of the Licensed
Marks and Name. This Agreement may be amended only by a signed writing, the form
of which shall have been approved by the affirmative vote of three-fourths of
the Plans and three-fourths of the total then current weighted vote of all the
Plans.
17. If any provision or any part of any provision of this Agreement
is judicially declared unlawful, each and every other provision, or any part of
any provision, shall continue in full force and effect notwithstanding such
judicial declaration.
18. No waiver by BCBSA or the Plan of any breach or default in
performance on the part of BCBSA or the Plan or any other licensee of any of the
terms, covenants or conditions of this Agreement shall constitute a waiver of
any subsequent breach or default in performance of said terms, covenants or
conditions.
19. All notices provided for hereunder shall be in writing and shall
be sent in duplicate by regular mail to BCBSA or the Plan at the address
currently published for each by BCBSA and shall be marked respectively to the
attention of the President and, if any, the General Counsel, of BCBSA or the
Plan.
Amended as of September 19, 1996
-8b-
20. Nothing herein contained shall be construed to constitute the
parties hereto as partners or joint venturers, or either as the agent of the
other, and Plan shall have no right to bind or obligate BCBSA in any way, nor
shall it represent that it has any right to do so. BCBSA shall have no liability
to third parties with respect to any aspect of the business, activities,
operations, products, or services of the Plan.
21. This Agreement shall be governed, construed and interpreted in
accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this License Agreement to be
executed, effective as of the date of last signature written below.
BLUE CROSS AND BLUE SHIELD ASSOCIATION
By_______________________________
Title____________________________
Date_____________________________
_________________________________
By_______________________________
Title____________________________
Date_____________________________
-9-
-20-
EXHIBIT 1
BLUE SHIELD
AFFILIATE LICENSE AGREEMENT
This Agreement by and among Blue Cross and Blue Shield Association
("BCBSA") and _______________________________________________ ("Affiliate"), an
affiliate of the Blue Shield Plan(s), known as _____________________ ("Plan"),
which is also a Party signatory hereto.
WHEREAS, BCBSA is the owner of the BLUE SHIELD and BLUE SHIELD
Design service marks;
WHEREAS, Plan and Affiliate desire that the latter be entitled to
use the BLUE SHIELD and BLUE SHIELD Design service marks (collectively the
"Licensed Marks") as service marks and be entitled to use the term BLUE SHIELD
in a trade name ("Licensed Name");
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, BCBSA hereby
grants to Affiliate the right to use the Licensed Marks and Name in connection
with, and only in connection with: (i) health care plans and related services
and administering the non-health portion of workers' compensation insurance, and
(ii) underwriting the indemnity portion of workers' compensation insurance,
provided that Affiliate's total premium revenue comprises less than 15 percent
of the sponsoring Plan's net subscription revenue.
This grant of rights is non-exclusive and is limited to the Service Area served
by the Plan. Affiliate may not use the Licensed Marks and Name in its legal name
and may use the Licensed Marks and Name in its Trade Name only with the prior
consent of BCBSA.
2. QUALITY CONTROL
A. Affiliate agrees to use the Licensed Marks and Name only in
connection with the licensed services and further agrees to be bound by the
conditions regarding quality control shown in attached Exhibit A as they may be
amended by BCBSA from time-to-time.
B. Affiliate agrees to comply with all applicable federal, state and
local laws.
C. Affiliate agrees that it will provide on an annual basis (or more
often if reasonably required by Plan or by BCBSA) a report or reports to Plan
and BCBSA demonstrating Affiliate's compliance with the requirements of this
Agreement including but not limited to the quality control provisions of this
paragraph and the attached Exhibit A.
D. Affiliate agrees that Plan and/or BCBSA may, from time-to-time,
upon reasonable notice, review and inspect the manner and method of Affiliate's
rendering of service and use of the Licensed Marks and Name.
E. As used herein, an Affiliate is defined as an entity organized
and operated in such a manner, that it meets the following requirements:
(1) If the Plan has 50 percent of the voting control of the Affiliate:
(a) the Plan must have the legal ability to prevent any change in
the articles of incorporation, bylaws or other establishing or
governing documents of the Affiliate with which it does not concur;
(b) the Plan must have at least equal control over the operations of
the Affiliate;
(c) the Plan must concur in writing before the Affiliate can:
(i) change its legal and/or trade names;
(ii) change the geographic area in which it
operates;
(iii) change the fundamental type(s) of business
in which it engages;
(iv) take any action that Plan or BCBSA
reasonably believes will adversely affect
the Licensed Marks and Name.
(2) If the Plan has more than 50 percent voting control of the
Affiliate:
(a) the Plan must have the legal ability to prevent any change in
the articles of incorporation, bylaws or other establishing or governing
documents of the Affiliate with which it does not concur;
(b) the Plan must have control over the policy and operations of
the Affiliate.
3. SERVICE ▇▇▇▇ USE
A. Affiliate shall at all times make proper service ▇▇▇▇ use of the
Licensed Marks and Name, including but not limited to use of such symbols or
words as BCBSA shall specify to protect the Licensed Marks and Name and shall
comply with such rules (generally applicable to Affiliates licensed to use the
Licensed Marks and Name) relative to service ▇▇▇▇ use, as are issued from
time-to-time by BCBSA. Affiliate recognizes and agrees that all use of the
Licensed Marks and Name by Affiliate shall inure to the benefit of BCBSA.
B. Affiliate may not directly or indirectly use the Licensed Marks
and Name in a manner that transfers or is intended to transfer in the Service
Area the goodwill associated therewith to another ▇▇▇▇ or name, nor may
Affiliate engage in activity that may dilute or tarnish the unique value of the
Licensed Marks and Name.
C. If Affiliate meets the standards of 2E(1) but not 2E(2) above and
any of Affiliate's advertising or promotional material is reasonably determined
by BCBSA and/or the Plan to be in contravention of rules and regulations
governing the use of the Licensed Marks and Name, Affiliate shall for ninety
(90) days thereafter obtain prior approval from BCBSA of advertising and
promotional efforts using the Licensed Marks and Name, approval or disapproval
thereof to be forthcoming within five (5) business days of receipt of same by
BCBSA or its designee. In all advertising and promotional efforts, Affiliate
shall observe the Service Area limitations applicable to Plan.
D. Affiliate shall use its best efforts in the Service Area to
promote and build the value of the Licensed Marks and Name.
4. SUBLICENSING AND ASSIGNMENT
Affiliate shall not sublicense, transfer, hypothecate, sell,
encumber or mortgage, by operation of law or otherwise, the rights granted
hereunder and any such act shall be voidable at the sole option of Plan or
BCBSA. This Agreement and all rights and duties hereunder are personal to
Affiliate.
5. INFRINGEMENT
Affiliate shall promptly notify Plan and Plan shall promptly notify
BCBSA of any suspected acts of infringement, unfair competition or passing off
that may occur in relation to the Licensed Marks and Name. Affiliate shall not
be entitled
to require Plan or BCBSA to take any actions or institute any proceedings to
prevent infringement, unfair competition or passing off by third parties.
Affiliate agrees to render to Plan and BCBSA, without charge, all reasonable
assistance in connection with any matter pertaining to the protection of the
Licensed Marks and Name by BCBSA.
6. LIABILITY INDEMNIFICATION
Affiliate and Plan hereby agree to save, defend, indemnify and hold
BCBSA harmless from and against all claims, damages, liabilities and costs of
every kind, nature and description (except those arising solely as a result of
BCBSA's negligence) that may arise as a result of or related to Affiliate's
rendering of services under the Licensed Marks and Name.
7. LICENSE TERM
A. Except as otherwise provided herein, the license granted by this
Agreement shall remain in effect for a period of one (1) year and shall be
automatically extended for additional one (1) year periods upon evidence
satisfactory to the Plan and BCBSA that Affiliate meets the then applicable
quality control standards.
B. This Agreement and all of Affiliate's rights hereunder shall
immediately terminate without any further action by any party or entity in the
event that Plan ceases to be authorized to use the Licensed Marks and Name.
C. Notwithstanding any other provision of this Agreement, this
license to use the Licensed Marks and Name may be forthwith terminated by the
Plan or the affirmative vote of the majority of the Board of Directors of BCBSA
present and voting at a special meeting expressly called by BCBSA for the
purpose on ten (10) days written notice for: (1) failure to comply with any
applicable minimum capital or liquidity requirement under the quality control
standards of this Agreement; or (2) failure to comply with the "Organization and
Governance" quality control standard of this Agreement; or (3) impending
financial insolvency; or (4) for a Smaller Affiliate (as defined in Exhibit A),
failure to comply with any of the applicable requirements of Standards 2, 3, 4,
5 or 7 of attached Exhibit A; or (5) such other reason as is determined in good
faith immediately and irreparably to threaten the integrity and reputation of
BCBSA, the Plans, any other licensee including Affiliate and/or the Licensed
Marks and Name.
D. Except as otherwise provided in Paragraphs 7(B), 7(C) or 7(E)
herein, should Affiliate fail to comply with the provisions of this Agreement
and not cure such failure within thirty (30) days of receiving written notice
thereof (or commence a cure within such thirty day period and continue diligent
efforts to complete the cure if such curing cannot reasonably be completed
within such thirty day period) BCBSA or the Plan shall have the right to issue a
notice that the Affiliate is in a state of noncompliance. If a state of
noncompliance as aforesaid is undisputed by the Affiliate or is found to exist
by a mandatory dispute resolution panel and is uncured as provided above, BCBSA
shall have the right to seek judicial enforcement of the Agreement or to issue a
notice of termination thereof. Notwithstanding any other provisions of this
Agreement, any disputes as to the termination of this License pursuant to
Paragraphs 7(B), 7(C) or 7(E) of this Agreement shall not be subject to
mediation and mandatory dispute resolution. All other disputes between BCBSA,
the Plan and/or Affiliate shall be submitted promptly to mediation and mandatory
dispute resolution. The mandatory dispute resolution panel shall have authority
to issue orders for specific performance and assess monetary penalties. Except,
however, as provided in Paragraphs 7(B) and 7(E) of this Agreement, this license
to use the Licensed Marks and Name may not be finally terminated for any reason
without the affirmative vote of a majority of the present and voting members of
the Board of Directors of BCBSA.
E. This Agreement and all of Affiliate's rights hereunder shall
immediately terminate without any further action by any party or entity in the
event that:
(1) Affiliate shall no longer comply with item 2(E) above;
(2) Appropriate dues, royalties and other payments for Affiliate
pursuant to paragraph 9 hereof, which are the royalties for this License
Agreement, are more than sixty (60) days in arrears to BCBSA; or
(3) Any of the following events occur: (i) a voluntary petition
shall be filed by Affiliate seeking bankruptcy, reorganization, arrangement with
creditors or other relief under the bankruptcy laws of the United States or any
other law governing insolvency or debtor relief, or (ii) an involuntary petition
or proceeding shall be filed against Affiliate seeking bankruptcy,
reorganization, arrangement with creditors or other relief under the bankruptcy
laws of the United States of any other law governing insolvency or debtor relief
and such petition or proceeding is consented to or acquiesced in by Affiliate or
is not dismissed within sixty (60) days of the date upon which it was filed, or
(iii) an order for relief is entered against Affiliate in any case under the
bankruptcy laws of the United States, or Affiliate is adjudged bankrupt or
insolvent as those terms are defined in the Uniform Commercial Code as enacted
in the State of Illinois
by any court of competent jurisdiction, or (iv) Affiliate makes a general
assignment of its assets for the benefit of creditors, or (v) the Department of
Insurance or other regulatory agency assumes control of Affiliate or delinquency
proceedings (voluntary or involuntary) are instituted, or (vi) an action is
brought by Affiliate seeking its dissolution or liquidation of its assets or
seeking the appointment of a trustee, interim trustee, receiver or other
custodian for any of its property or business, or (vii) an action is instituted
against Affiliate seeking its dissolution or liquidation of its assets or
seeking the appointment of a trustee, interim trustee, receiver or other
custodian for any of its property or business and such action is consented to or
acquiesced in by Affiliate or is not dismissed within sixty (60) days of the
date upon which it was instituted, or (viii) a trustee, interim trustee,
receiver or other custodian for any of Affiliate's property or business is
appointed.
F. Upon termination of this Agreement for cause or otherwise,
Affiliate agrees that it shall immediately discontinue all use of the Licensed
Marks and Name, including any use in its trade name.
G. Upon termination of this Agreement, Affiliate shall immediately
notify all of its customers that it is no longer a licensee of BCBSA and, if
directed by the Association's Board of Directors, shall provide instruction on
how the customer can contact BCBSA or a designated licensee to obtain further
information on securing coverage. The notification required by this paragraph
shall be in writing and in a form approved by BCBSA. The BCBSA shall have the
right to audit the terminated entity's books and records to verify compliance
with this paragraph.
H. In the event that the Plan has more than 50 percent voting
control of the Affiliate under Paragraph 2(E)(2) above and is a Larger Affiliate
(as defined in Exhibit A), then the vote called for in Paragraphs 7(C) and 7(D)
above shall require the affirmative vote of three-fourths of the Blue Shield
Plans which are Regular Members of BCBSA and three-fourths of the total then
current weighted vote of all the Blue Shield Plans which are Regular Member
Plans of BCBSA.
8. DISPUTE RESOLUTION
The parties agree that any disputes between them or between or among
either of them and one or more Plans or Affiliates of Plans that use in any
manner the Blue Cross and Blue Shield Marks and Name are subject to the
Mediation and Mandatory Dispute Resolution process attached to and made a part
of Plan's License from BCBSA to use the Licensed Marks and Name as Exhibits 5,
5A and 5B as amended from time-to-time, which documents are incorporated herein
by reference as though fully set forth herein.
9. LICENSE FEE
Affiliate will pay to BCBSA a fee for this License determined
pursuant to the formula(s) set forth in Exhibit B.
10. JOINT VENTURE
Nothing contained in the Agreement shall be construed as creating a
joint venture, partnership, agency or employment relationship between Plan and
Affiliate or between either and BCBSA.
11. NOTICES AND CORRESPONDENCE
Notices regarding the subject matter of this Agreement or breach or
termination thereof shall be in writing and shall be addressed in duplicate to
the last known address of each other party, marked respectively to the attention
of its President and, if any, its General Counsel.
12. COMPLETE AGREEMENT
This Agreement contains the complete understandings of the parties
in relation to the subject matter hereof. This Agreement may only be amended by
a writing executed by all parties hereto or by the vote of three-fourths of the
Plans and three-fourths of the total then current weighted vote of all the
Plans.
13. SEVERABILITY
If any term of this Agreement is held to be unlawful by a court of
competent jurisdiction, such findings shall in no way affect the remaining
obligations of the parties hereunder and the court may substitute a lawful term
or condition for any unlawful term or condition so long as the effect of such
substitution is to provide the parties with the benefits of this Agreement.
14. NONWAIVER
No waiver by BCBSA of any breach or default in performance on the
part of Affiliate or any other licensee of any of the terms, covenants or
conditions of this Agreement shall constitute a waiver of any subsequent breach
or default in performance of said terms, covenants or conditions.
15. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of the State of Illinois.
16. HEADINGS
The headings inserted in this agreement are for convenience only and
shall have no bearing on the interpretation hereof.
IN WITNESS WHEREOF, the parties have caused this License Agreement
to be executed and effective as of the date of last signature written below.
Affiliate
By:_______________________________________
Date:_____________________________________
Plan
By:_______________________________________
Date:_____________________________________
BLUE CROSS AND BLUE SHIELD ASSOCIATION
By:_______________________________________
Date:_____________________________________
EXHIBIT A
AFFILIATE LICENSE STANDARDS
June 1996
PREAMBLE
The standards for licensing affiliates are established by BCBSA and are subject
to change from time-to-time upon the affirmative vote of three-fourths (3/4) of
the Plans and three-fourths (3/4) of the total weighted vote. Each licensed Plan
is required to use a standard affiliate license form provided by BCBSA and to
cooperate fully in assuring that the licensed affiliate maintains compliance
with the license standards.
The Affiliate License provides a flexible vehicle to accommodate the potential
range of health and workers' compensation related products and services Plan
affiliates provide. The Affiliate License collapses former health affiliate
licenses (HCC, HMO, PPO, TPA, and IDS) into a single license using the following
business-based criteria to provide a framework for license standards:
o Percent of affiliate controlled by parent: Greater than 50 percent or 50
percent?
o Risk assumption: yes or no?
o Medical care delivery: yes or no?
o Importance of the affiliate to the parent: If the affiliate has health or
workers' compensation administration business, does such business
constitute 15 percent or more (referred to as a "larger" affiliate) of the
parent's and other licensed health subsidiaries' contract enrollment?
EXHIBIT A (continued)
For purposes of definition:
o A "smaller affiliate:" (1) comprises less than fifteen percent (15%) of
Plan's and its licensed affiliates' total contract enrollment (as reported
on the BCBSA Quarterly Enrollment Report, excluding rider and freestanding
coverage, and treating an entity seeking licensure as licensed);* or (2)
underwrites the indemnity portion of workers' compensation insurance and
has total premium revenue less than 15 percent of the sponsoring Plan's
net subscription revenue.
o A "larger affiliate" comprises fifteen percent (15%) or more of Plan's and
its licensed affiliates' total contract enrollment (as reported on the
BCBSA Quarterly Enrollment Report, excluding rider and freestanding
coverage, and treating an entity seeking licensure as licensed.)*
Conversion to the new license shall be:
o For smaller affiliates:
- immediately for new applicants, and
- January 1, 1996 for existing HMO, PPO, TPA and IDS licensees
under fifteen percent (15%).
o For larger affiliates:
- immediately for new applicants,
- July 1, 1995 for existing health coverage carrier licensees, and
- June 1996, for all other currently licensed affiliates presently at
or over fifteen percent(15%).
Changes in affiliate status:
If any affiliate's status changes regarding: its Plan ownership level, its risk
acceptance or direct delivery of medical care, the affiliate shall notify BCBSA
within thirty (30) days of such occurrence in writing and come into compliance
with the applicable standards within six (6) months.
If a smaller affiliate's health and workers' compensation administration
business surpasses fifteen percent (15%) of the total contract enrollment of the
Plan and licensed affiliates, the affiliate shall:
EXHIBIT A (continued)
1. Within thirty (30) days, notify BCBSA of this fact in writing, including
evidence that the affiliate meets the minimum liquidity and capital (BCBSA
Capital Benchmark and state-established minimum reserve) requirements of
the larger affiliate Financial Responsibility standard; and
2. Within six (6) months after surpassing the fifteen percent (15%)
threshold, demonstrate compliance with all license requirements for a
larger affiliate.
If an affiliate that underwrites the indemnity portion of workers' compensation
insurance receives a change in rating or proposed change in rating, the
affiliate shall notify BCBSA within 30 days of notification by the external
rating agency.
-----------
*For purposes of this calculation,
The numerator equals:
Applicant affiliate's contract enrollment, as defined in BCBSA's Quarterly
Enrollment Report (excluding rider and freestanding coverage).
The denominator equals:
Numerator PLUS Plan and all other licensed affiliates' contract enrollment, as
reported in BCBSA's Quarterly Enrollment Report (excluding rider and
freestanding coverage).
EXHIBIT A (continued)
STANDARDS FOR LICENSED AFFILIATES
Each affiliate seeking licensure must answer all four questions. Depending
on the affiliate's answers, certain standards apply:
1. What percent of the affiliate is controlled by the parent Plan?
More than 50% 50%
(arrow down) (arrow down)
Standard 1A, 4 Standard 1B, 4
IN ADDITION,
2. Is risk being assumed?
Yes No
(arrows down) (arrows down)
Affiliate Affiliate Affiliate Affiliate comprises Affiliate
underwrites comprises (less than)15% comprises (greater than (less than)15% of total comprises (greater
any indemnity of total contract or equal to)15% contract than or equal to)15%
portion of enrollment of of total contract enrollment of Plan of total contract
workers' Plan and its enrollment of and its licensed enrollment of
compensation licensed affiliates, Plan and its affiliates Plan and its
insurance and does not licensed affiliates, (arrow down) licensed affiliates
(arrow down) underwrite the and does not Standard 2 (arrow down)
Standards indemnity portion underwrite the (Guidelines 2.1, 2.3) Standard 6H
7A-7E of workers' indemnity portion
compensation of workers'
insurance compensation
(arrow down) insurance
Standard 2 (arrow down)
(Guidelines 2.1, 2.2) Standard 6H
IN ADDITION,
3. Is medical care being directly provided?
Yes No
(arrow down) (arrow down)
Standard 3A Standard 3B
IN ADDITION,
4. If the affiliate has health or workers' compensation administration
business, does such business comprise 15% or more of the total contract
enrollment of Plan and its licensed affiliates?
Yes No
(arrow down) (arrows down)
Standards 6A-6I Affiliate is a Affiliate is
former primary not a former
licensee primary licensee
(arrow down) (arrow down)
Standards 5,8,9 Standards 5,8
EXHIBIT A (continued)
Standard 1 - Organization and Governance
1A.) The Standard for more than 50% Plan ownership is:
An affiliate shall be organized and operated in such a manner that it is
controlled by a licensed Plan or Plans which have, directly or indirectly: 1)
more than 50% of the voting control of the affiliate; and 2) the legal ability
to prevent any change in the articles of incorporation, bylaws or other
establishing or governing documents of the affiliate with which it does not
concur; and 3) operational control of the affiliate.
1B.) The Standard for 50% Plan ownership is:
An affiliate shall be organized and operated in such a manner that a licensed
Plan or Plans have directly or indirectly:
1) not less than 50% of the voting control of the affiliate; and
2) the legal ability to prevent any change in the articles of
incorporation, bylaws or other establishing or governing documents
of the affiliate with which it does not concur; and
3) at least equal direct or indirect control over the operations of the
affiliate; and
4) sufficient authority so that changes in the following require the
approval of the Licensed Plan or Plans:
o geographic operating area of the affiliate
o the legal and trade names of the affiliate
o the types of activity in which the affiliate engages
o any action which would cause the affiliate to be in
violation of the Standards applicable to Licensure by
BCBSA.
EXHIBIT A (continued)
Standard 2 - Financial Responsibility
An affiliate shall be operated in a manner that provides reasonable financial
assurance that it can fulfill all of its contractual obligations to its
customers. If a risk-assuming affiliate ceases operations for any reason, Blue
Cross and/or Blue Shield Plan coverage will be offered to all affiliate
subscribers without exclusions, limitations or conditions based on health
status. If a nonrisk-assuming affiliate ceases operations for any reason,
sponsoring Plan(s) will provide for services to its (their) customers.
Standard 3 - State Licensure/Certification
3A.) The Standard for an affiliate that employs, owns or contracts on a
substantially exclusive basis for medical services is:
An affiliate shall maintain unimpaired licensure or certification for its
medical care providers to operate under applicable state laws.
3B.) The Standard for an affiliate that does not employ, own or contract
on a substantially exclusive basis for medical services is:
An affiliate shall maintain unimpaired licensure or certification to operate
under applicable state laws.
Standard 4 - Certain Disclosures
An affiliate shall make adequate disclosure in contracting with third parties
and in disseminating public statements of 1) the structure of the Blue Cross and
Blue Shield System; and 2) the independent nature of every licensee; and 3) the
affiliate's financial condition.
Standard 5 - Reports and Records for Certain Smaller Affiliates
For a smaller affiliate that does not underwrite the indemnity portion of
workers' compensation insurance, the Standard is:
An affiliate and/or its licensed Plan(s) shall furnish, on a timely and accurate
basis, reports and records relating to these Standards and the License
Agreements between BCBSA and affiliate.
EXHIBIT A (continued)
Standard 6 - Other Standards for Larger Affiliates
Standards 6(A) - (I) that follow apply to larger affiliates.
Standard 6(A): Board of Directors
An affiliate Governing Board shall act in the interest of its Corporation in
providing cost-effective health care services to its customers. An affiliate
shall maintain a governing Board, which shall control the affiliate, composed of
a majority of persons other than providers of health care services, who shall be
known as public members. A public member shall not be an employee of or have a
financial interest in a health care provider, nor be a member of a profession
which provides health care services.
Standard 6(B): Responsiveness to Customers
An affiliate shall be operated in a manner responsive to customer needs and
requirements.
Standard 6(C): Participation in National Programs
An affiliate shall effectively and efficiently participate in each national
program as from time to time may be adopted by the Member Plans for the purposes
of providing portability of membership between the licensees and ease of claims
processing for customers receiving benefits outside of the affiliate's Service
Area.
Such programs are applicable to licensees, and include:
A. Inter-Plan Transfer Agreement;
B. National Account Equalization Program;
C. BlueCard Program;
EXHIBIT A (continued)
D. Inter-Plan Teleprocessing System (ITS); and
E. Inter-Plan Data Reporting (IPDR) Program.
Standard 6(D): Financial Performance Requirements
In addition to requirements under the national programs listed in
Standard 6C: Participation in National Programs, an affiliate shall take such
action as required to ensure its financial performance in programs and contracts
of an inter-licensee nature or where BCBSA is a party.
Standard 6(E): Cooperation with Plan Performance Response Process
An affiliate shall cooperate with BCBSA's Board of Directors and its Plan
Performance and Financial Standards Committee in the administration of the Plan
Performance Response Process and in addressing affiliate performance problems
identified thereunder.
Standard 6(F): Independent Financial Rating
An affiliate shall obtain a rating of its financial strength from an independent
rating agency approved by BCBSA's Board of Directors for such purpose.
Standard 6(G): Best Efforts
During each year, an affiliate shall use its best efforts in the designated
Service Area to promote and build the value of the Blue Shield ▇▇▇▇.
Standard 6(H): Financial Responsibility
An affiliate shall be operated in a manner that provides reasonable financial
assurance that it can fulfill all of its contractual obligations to its
customers.
EXHIBIT A (continued)
Standard 6(I): Reports and Records
An affiliate shall furnish to BCBSA on a timely and accurate basis reports and
records relating to compliance with these Standards and the License Agreements
between BCBSA and affiliate. Such reports and records are the following:
A) Annual Application for Renewal of Standard Affiliate
License for affiliates, including trade name and service
▇▇▇▇ usage material;
B) Changes in the ownership and governance of the
affiliate, including changes in its charter, articles of
incorporation, or bylaws, changes in an affiliate's
Board composition, or changes in the identity of the
affiliate's Principal Officers, and changes in risk
acceptance, contract growth, or direct delivery of
medical care; and
C) Quarterly Financial Report including the Capital
Benchmark Worksheet, Annual Financial Forecast, Annual
Certified Audit Report, Insurance Department Examination
Report, Annual Statement filed with State Insurance
Department (with all attachments); and
D) Quarterly Utilization Report, Quarterly Enrollment
Report, Cost Containment Report, NMIS Quarterly Report.
Standard 7 - Other Standards for Risk-Assuming Workers' Compensation Affiliates
Standards 7(A) - (E) that follow apply to affiliates that underwrite the
indemnity portion of workers' compensation insurance.
Standard 7 (A): Financial Responsibility
An affiliate shall be operated in a manner that provides reasonable financial
assurance that it can fulfill all of its contractual obligations to its
customers.
EXHIBIT A (continued)
Standard 7(B): Reports and Records
An affiliate shall furnish, on a timely and accurate basis, reports and records
relating to compliance with these Standards and the License Agreements between
BCBSA and the affiliate. Such reports and records are the following:
A. Annual Application for Renewal of Standard Affiliate License for
affiliates, including trade name and service ▇▇▇▇ usage materials; and
B. Annual Certified Audit Report, Annual Statement as filed with the State
Insurance Department (with all attachments), Annual NAIC's Risk-Based
Capital Worksheets for Property and Casualty Insurers, and Annual
Financial Forecast; and
C. Quarterly Financial Report, Quarterly Estimated Risk-Based Capital for
Property and Casualty Insurers, Insurance Department Examination Report,
and Quarterly NMIS Report (for licensed health business only); and
D. Notification of all changes and proposed changes to independent ratings
within 30 days of receipt and submission of a copy of all rating
reports; and
E. Changes in the ownership and governance of the affiliate including
changes in its charter, articles of incorporation, or bylaws, changes in
an affiliate's Board composition, Plan control, state license status,
operating area, the affiliate's Principal Officers or direct delivery of
medical care.
Standard 7(C): Loss Prevention
An affiliate shall apply loss prevention protocol to both new and existing
business.
EXHIBIT A (continued)
Standard 7(D): Claims Administration
An affiliate shall maintain an effective claims administration process that
includes all the necessary functions to assure prompt and proper resolution of
medical and indemnity claims.
Standard 7(E): Disability and Provider Management
An affiliate shall arrange for the provision of appropriate and necessary
medical and rehabilitative services to facilitate early intervention by medical
professionals and timely and appropriate return to work.
Standard 8 - Cooperation with Affiliate License Performance Response Process
Protocol
An affiliate and its Sponsoring Plan(s) shall cooperate with BCBSA's Board of
Directors and its Plan Performance and Financial Standards Committee in the
administration of the Affiliate License Performance Response Process Protocol
(ALPRPP) and in addressing affiliate compliance problems identified thereunder.
Standard 9: Participation in National Programs by Smaller Affiliates
A smaller affiliate for which this standard applies pursuant to the Preamble
section of Exhibit A of the Affiliate License Agreement shall effectively and
efficiently participate in certain national programs from time to time as may be
adopted by Member Plans for the purposes of providing ease of claims processing
for customers receiving benefits outside of the affiliate's service area and be
subject to certain relevant financial and reporting requirements.
EXHIBIT B
ROYALTY FORMULA FOR SECTION 9 OF THE
AFFILIATE LICENSE AGREEMENT
Affiliate will pay BCBSA a fee for this license in accordance with the following
formula:
FOR RISK PRODUCTS:
For affiliates not underwriting the indemnity portion of workers' compensation
insurance:
An amount equal to its pro rata share of each sponsoring Plan's dues payable to
BCBSA computed with the addition of the affiliate's subscription revenue and
contracts arising from products using the marks. The payment by each sponsoring
Plan of its dues to BCBSA, including that portion described in this paragraph,
will satisfy the requirement of this paragraph, and no separate payment will be
necessary.
For affiliates underwriting the indemnity portion of workers' compensation
insurance:
An amount equal to 0.35 percent of the gross revenue per annum of affiliate
arising from products using the marks; plus, an annual fee of $5,000 per license
for an affiliate subject to Standard 7.
FOR NONRISK PRODUCTS:
An amount equal to 0.24 percent of the gross revenue per annum of affiliate
arising from products using the marks; plus:
1) An annual fee of $5,000 per license for an affiliate subject to
Standard 6.
2) An annual fee of $2,000 per license for all other affiliates.
The foregoing shall be reduced by one-half where both a BLUE CROSS(R) and BLUE
SHIELD(R) License are issued to the same affiliate. In the event that any
license period is greater or less than one (1) year, any amounts due shall be
prorated. Royalties under this formula will be calculated, billed and paid in
arrears.
EXHIBIT 1A
CONTROLLED AFFILIATE LICENSE AGREEMENT
APPLICABLE TO LIFE INSURANCE COMPANIES
This agreement by and among Blue Cross and Blue Shield Association
("BCBSA") _______________________________("Controlled Affiliate"), a controlled
affiliate of the Blue Shield Plan(s), known as
_______________________________________("Plan").
WHEREAS, BCBSA is the owner of the BLUE SHIELD and BLUE SHIELD Design service
marks;
WHEREAS, the Plan and the Controlled Affiliate desire that the latter be
entitled to use the BLUE SHIELD and BLUE SHIELD Design service marks
(collectively the "Licensed Marks") as service marks and be entitled to use the
term BLUE SHIELD in a trade name ("Licensed Name");
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. GRANT OF LICENSE
Subject to the terms and conditions of this Agreement, BCBSA
hereby grants to the Controlled Affiliate the exclusive right to use the
licensed Marks and Names in connection with and only in connection with those
life insurance and related services authorized by applicable state law, other
than health care plans and related services (as defined in the Plan's License
Agreements with BCBSA) which services are not separately licensed to Controlled
Affiliate by BCBSA, in the Service Area served by the Plan, except that BCBSA
reserves the right to use the Licensed Marks and Name in said Service Area, and
except to the extent that said Service Area may overlap the area or areas served
by one or more other licensed Blue Shield Plans as of the date of this License
as to which overlapping areas the rights hereby granted are non-exclusive as to
such other Plan or Plans and their respective Licensed Controlled Affiliates
only. Controlled Affiliate cannot use the Licensed Marks or Name outside the
Service Area or, anything in any other license to Controlled Affiliate
notwithstanding, in its legal or trade name.
2. QUALITY CONTROL
A. Controlled Affiliate agrees to use the Licensed Marks and
Name only in relation to the sale, marketing and rendering of authorized
products and further agrees to be bound by the conditions regarding quality
control shown in Exhibit A as it may be amended by BCBSA from time-to-time.
Amended as of November 17, 1994
-1-
B. Controlled Affiliate agrees that Plan and/or BCBSA may, from
time-to-time, upon reasonable notice, review and inspect the manner and method
of Controlled Affiliate's rendering of service and use of the Licensed Marks and
Name.
C. Controlled Affiliate agrees that it will provide on an annual
basis (or more often if reasonably required by Plan or by BCBSA) a report to
Plan and BCBSA demonstrating Controlled Affiliate's compliance with the
requirements of this Agreement including but not limited to the quality control
provisions of Exhibit A.
D. As used herein, a Controlled Affiliate is defined as an entity
organized and operated in such a manner that it is subject to the bona fide
control of a Plan or Plans. Absent written approval by BCBSA of an alternative
method of control, bona fide control shall mean the legal authority, directly or
indirectly through wholly-owned subsidiaries: (a) to select members of the
Controlled Affiliate's governing body having not less than 51% voting control
thereof; (b) to exercise operational control with respect to the governance
thereof; and (c) to prevent any change in its articles of incorporation, bylaws
or other governing documents deemed inappropriate. In addition, a Plan or Plans
shall own at least 51% of any for-profit Controlled Affiliate. If the Controlled
Affiliate is a mutual company, the Plan or its designee(s) shall have and
maintain, in lieu of the requirements of items (a) and (c) above, proxies
representing 51% of the votes at any meeting of the policyholders and shall
demonstrate that there is no reason to believe this such proxies shall be
revoked by sufficient policyholders to reduce such percentage below 51%.
3. SERVICE ▇▇▇▇ USE
Controlled Affiliate shall at all times make
proper service ▇▇▇▇ use of the Licensed Marks, including but not limited to use
of such symbols or words as BCBSA shall specify to protect the Licensed Marks,
and shall comply with such rules (applicable to all Controlled Affiliates
licensed to use the Marks) relative to service ▇▇▇▇ use, as are issued from
time-to-time by BCBSA. If there is any public reference to the affiliation
between the Plan and the Controlled Affiliate, all of the Controlled Affiliate's
licensed services in the Service Area of the Plan shall be rendered under the
Licensed Marks. Controlled Affiliate recognizes and agrees that all use of the
Licensed Marks by Controlled Affiliate shall inure to the benefit of BCBSA.
4. SUBLICENSING AND ASSIGNMENT
Controlled Affiliate shall not sublicense,
transfer, hypothecate, sell, encumber or mortgage, by operation of law or
otherwise, the rights granted hereunder and any such act shall be
-2-
voidable at the option of Plan or BCBSA. This Agreement and all rights and
duties hereunder are personal to Controlled Affiliate.
5. INFRINGEMENTS
Controlled Affiliate shall promptly notify Plan and BCBSA of
any suspected acts of infringement, unfair competition or passing off which may
occur in relation to the Licensed Marks. Controlled Affiliate shall not be
entitled to require Plan or BCBSA to take any actions or institute any
proceedings to prevent infringement, unfair competition or passing off by third
parties. Controlled Affiliate agrees to render to Plan and BCBSA, free of
charge, all reasonable assistance in connection with any matter pertaining to
the protection of the Licensed Marks by BCBSA.
6. LIABILITY INDEMNIFICATION
Controlled Affiliate hereby agrees to save, defend, indemnify
and hold Plan and BCBSA harmless from and against all claims, damages,
liabilities and costs of every kind, nature and description which may arise as a
result of Controlled Affiliate's rendering of health care services under the
Licensed Marks.
7. LICENSE TERM
The license granted by this Agreement shall remain in effect
for a period of one (1) year and shall be automatically extended for additional
one (1) year periods upon evidence satisfactory to the Plan and BCBSA that
Controlled Affiliate meets the then applicable quality control standards, unless
one of the parties hereto notifies the other party of the termination hereof at
least sixty (60) days prior to expiration of any license period.
This Agreement may be terminated by the Plan or by BCBSA for
cause at any time provided that Controlled Affiliate has been given a reasonable
opportunity to cure and shall not effect such a cure within thirty (30) days of
receiving written notice of the intent to terminate (or commence a cure within
such thirty day period and continue diligent efforts to complete the cure if
such curing cannot reasonably be completed within such thirty day period). By
way of example and not for purposes of limitation, Controlled Affiliate's
failure to abide by the quality control provisions of Paragraph 2, above, shall
be considered a proper ground for cancellation of this Agreement.
This Agreement and all of Controlled Affiliate's rights
hereunder shall immediately terminate without any further action by any party or
entity in the event that:
-3-
A. Controlled Affiliate shall no longer comply with Standard No. 1
(Organization and Governance) of Exhibit A or, following an opportunity to cure,
with the remaining quality control provisions of Exhibit A, as it may be amended
from time-to-time; or
B. Plan ceases to be authorized to use the Licensed Marks; or
C. Appropriate dues for Controlled Affiliate pursuant to item 8
hereof, which are the royalties for this License Agreement are more than sixty
(60) days in arrears to BCBSA.
Upon termination of this Agreement for cause or otherwise,
Controlled Affiliate agrees that it shall immediately discontinue all use of the
Licensed Marks including any use in its trade name.
In the event of any disagreement between Plan and BCBSA as to
whether grounds exist for termination or as to any other term or condition
hereof, the decision of BCBSA shall control, subject to provisions for mediation
or mandatory dispute resolution in effect between the parties.
Upon termination of this Agreement, Licensed Controlled Affiliate
shall immediately notify all of its customers that it is no longer a licensee of
the Blue Cross and Blue Shield Association and provide instruction on how the
customer can contact the Blue Cross and Blue Shield Association or a designated
licensee to obtain further information on securing coverage. The written
notification required by this paragraph shall be in writing and in a form
approved by the Association. The Association shall have the right to audit the
terminated entity's books and records to verify compliance with this paragraph.
8. DUES
Controlled Affiliate will pay to BCBSA a fee for this license in
accordance with the following formula:
o An annual fee of five thousand dollars ($5,000) per license, plus
o .05 percent of gross revenue per annum of Licensee arising from
group products using the Marks, plus
o .5 percent of gross revenue per annum of Licensee arising from
individual products using the Marks
The foregoing percentages shall be reduced by one-half where both a
BLUE CROSS(R) and BLUE SHIELD(R) license are issued to the same entity. In the
event that any License period is greater or less than one (1) year, any amounts
due shall be prorated. Royalties under this formula will be calculated, billed
and paid in arrears.
Amended as of September 29, 1994
-4-
Plan will promptly and timely transmit to BCBSA all dues owed by
Controlled Affiliate as determined by the above formula and if Plan shall fail
to do so, Controlled Affiliate shall pay such dues directly.
9. JOINT VENTURE
Nothing contained in this Agreement shall be construed as creating a
joint venture, partnership, agency or employment relationship between Plan and
Controlled Affiliate or between either and BCBSA.
-4a-
10. NOTICES AND CORRESPONDENCE
Notices regarding the subject matter of this Agreement or breach or
termination thereof shall be in writing and shall be addressed in duplicate to
the last known address of each other party, marked respectively to the attention
of its President and, if any, its General Counsel.
11. COMPLETE AGREEMENT
This Agreement contains the complete understandings of the parties
in relation to the subject matter hereof. This Agreement may only be amended by
a writing executed by all parties.
12. SEVERABILITY
If any term of this Agreement is held to be unlawful by a court of
competent jurisdiction, such finding shall in no way effect the remaining
obligations of the parties hereunder and the court may substitute a lawful term
or condition for any unlawful term or condition so long as the effect of such
substitution is to provide the parties with the benefits of this Agreement.
13. NONWAIVER
No waiver by BCBSA of any breach or default in performance on the
part of the Controlled Affiliate or any other licensee of any of the terms,
covenants or conditions of this Agreement shall constitute a waiver of any
subsequent breach or default in performance of said terms, covenants or
conditions.
14. GOVERNING LAW
This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have caused this License Agreement to be
executed, effective as of the date of last signature written below.
BLUE CROSS AND BLUE SHIELD ASSOCIATION
By:___________________________________
Date:_________________________________
______________________________________
Controlled Affiliate
By:___________________________________
Date:_________________________________
Plan:_________________________________
-5-
EXHIBIT A
CONTROLLED AFFILIATE LICENSE STANDARDS
LIFE INSURANCE COMPANIES
Page 1 of 2
PREAMBLE
The standards for licensing Life Insurance Companies (Life and Health Insurance
companies, as defined by state statute) are established by BCBSA and are subject
to change from time-to-time upon the affirmative vote of three-fourths (3/4) of
the Plans and three-fourths (3/4) of the total weighted vote of all Plans. Each
Licensed Plan is required to use a standard controlled affiliate license form
provided by BCBSA and to cooperate fully in assuring that the licensed Life
Insurance Company maintains compliance with the license standards.
An organization meeting the following standards shall be eligible for a license
to use the Licensed Marks within the service area of its sponsoring Licensed
Plan to the extent and the manner authorized under the Controlled Affiliate
License applicable to Life Insurance Companies and the principal license to the
Plan.
Standard 1 - Organization and Governance
The LIC shall be organized and operated in such a manner that it is controlled
by a licensed Plan or Plans which have, directly or indirectly: 1) not less than
51% of the voting control of the LIC; and 2) the legal ability to prevent any
change in the articles of incorporation, bylaws or other establishing or
governing documents of the LIC with which it does not concur; and 3) operational
control of the LIC.
If the LIC is a mutual company, the Plan or its designee(s) shall have and
maintain, in lieu of the requirements of items 1 and 2 above, proxies
representing at least 51% of the votes at any policyholder meeting and shall
demonstrate that there is no reason to believe such proxies shall be revoked by
sufficient policyholders to reduce such percentage below 51%.
Standard 2 - State Licensure
The LIC must maintain unimpaired licensure or certificate of authority to
operate under applicable state laws as a life and health insurance company in
each state in which the LIC does business.
Standard 3 - Records and Examination
The LIC and its sponsoring licensed Plan(s) shall maintain and furnish, on a
timely and accurate basis, such records and reports regarding the LIC as may be
required in order to establish compliance with the license agreement. The LIC
and its sponsoring licensed Plan(s) shall permit BCBSA to examine the affairs of
the LIC and shall agree that BCBSA's board may submit a written report to the
chief executive officer(s) and the board(s) of directors of the sponsoring
Plan(s).
-1-
CONTROLLED AFFILIATE LICENSE STANDARDS
LIFE INSURANCE COMPANIES
Page 2 of 2
Standard 4 - Mediation
The LIC and its sponsoring Plan(s) shall agree to use the then-current BCBSA
mediation and mandatory dispute resolution processes, in lieu of a legal action
between or among another licensed controlled affiliate, a licensed Plan or
BCBSA.
Standard 5 - Financial Responsibility
The LIC shall maintain adequate financial resources to protect its customers and
meet its business obligations.
-2-
EXHIBIT 2
Membership Standards
Page 1 of 3
Preamble
The Membership Standards apply to all organizations seeking to become or to
continue as Regular Members of the Blue Cross and Blue Shield Association. Any
organization seeking to become a Regular Member must be found to be in
substantial compliance with all Membership Standards at the time membership is
granted and the organization must be found to be in substantial compliance with
all Membership Standards for a period of two (2) years preceding the date of its
application. If Membership is sought by an entity which controls or is
controlled by one or more Plans, such compliance shall be determined on the
basis of compliance by such Plan or Plans.
The Regular Member Plans shall have authority to interpret these Standards.
Compliance with any Membership Standard may be excused, at the Plans'
discretion, if the Plans agree that compliance with such Standard would require
the Plan to violate a law or governmental regulation governing its operation or
activities.
Standard 1: A Plan's Board shall not be controlled by any special interest
group, and shall act in the interest of its Corporation in
providing cost-effective health care services to its customers.
A Plan shall maintain a governing Board, which shall control
the Plan, composed of a majority of persons other than
providers of health care services, who shall be known as public
members. A public member shall not be an employee of or have a
financial interest in a health care provider, nor be a member
of a profession which provides health care services.
Standard 2: A Plan shall furnish to the Association on a timely and accurate
basis reports and records relating to compliance with these
Standards and the License Agreements between the Association and
the Plans. Such reports and records are the following:
A. Annual Application for Renewal of
BCBSA Membership, including trade
name and service ▇▇▇▇ usage material;
B. Changes in the governance of the Plan,
including changes in a Plan's Charter,
Articles of Incorporation, or Bylaws,
changes in a Plan's Board composition,
or changes in the identity of the
Plan's Principal Officers;
Amended as of June 24, 1994
EXHIBIT 2
Membership Standards
Page 2 of 3
C. Quarterly Financial Report including
the Plan Capital Benchmark Worksheet,
Annual Financial Forecast, Annual
Certified Audit Report, Insurance
Department Examination Report, Annual
Statement filed with State Insurance
Department (with all attachments), and
Consolidating Financial Statement;
D. Quarterly Utilization Report,
Quarterly Enrollment Report, Cost
Containment Report, and NMIS Quarterly
Report.
Standard 3: A Plan shall be operated in a manner that provides reasonable
financial assurance that it can fulfill its contractual obligations
to its customers.
Standard 4: A Plan shall be operated in a manner responsive to customer needs
and requirements.
Standard 5: A Plan shall effectively and efficiently participate in each
national program as from time to time may be adopted by the Member
Plans for the purposes of providing portability of membership
between the Plans and ease of claims processing for customers
receiving benefits outside of the Plan's Service Area.
Such programs are applicable to Blue Cross and Blue Shield Plans,
and include:
A. Inter-Plan Transfer Agreement;
B. National Account Equalization Program;
C. Inter-Plan Data Reporting (IPDR) Program;
D. Inter-Plan Teleprocessing System (ITS); and
E. BlueCard Program.
Amended as of August 2, 1996
EXHIBIT 2
Membership Standards
Page 3 of 3
Standard 6: In addition to requirements under the national programs listed in
Standard 5: Participation in National Programs, a Plan shall take
such action as required to ensure its financial performance in
programs and contracts of an inter-Plan nature or where the
Association is a party.
Standard 7: A Plan shall make adequate disclosure in contracting with third
parties and in disseminating public statements of (i) the structure
of the Blue Cross and Blue Shield System, (ii) the independent
nature of every Plan, and (iii) the Plan's financial condition.
Standard 8: A Plan shall cooperate with the Association's Board of Directors and
its Plan Performance and Financial Standards Committee in the
administration of the Plan Performance Response Process and in
addressing Plan performance problems identified thereunder.
Standard 9: A Plan shall obtain a rating of its financial strength from an
independent rating agency approved by the Association's Board of
Directors for such purpose.
Standard 10: During each year, a Plan and its Controlled Affiliate(s) engaged in
providing licensable services (excluding Life Insurance and
Charitable Foundation Services) shall use their best efforts in the
designated Service Area to promote and build the value of the Blue
Cross and Blue Shield Marks.
Standard 11: Neither a Plan nor any Larger Affiliate shall cause or permit an
unlicensed entity to obtain control of the Plan or Larger Affiliate
or to acquire a substantial portion of its assets related to
licensable services.
Amended as of September 19, 1996
EXHIBIT 3
GUIDELINES WITH RESPECT TO USE OF
LICENSED NAME AND MARKS IN CONNECTION WITH NATIONAL ACCOUNTS
Page 1 of 3
1. The strength of the Blue Cross/Blue Shield National Accounts mechanism, and
the continued provision of cost effective, quality health care benefits to
National Accounts, are predicated on locally managed provider networks
coordinated on a national scale in a manner consistent with effective service to
National Account customers and consistent with the preservation of the integrity
of the Blue Cross/Blue Shield system and the Licensed Marks. These guidelines
shall be interpreted in keeping with such ends.
2. A National Account is an entity with employee and/or retiree locations in
more than one Plan's Service Area. Unless otherwise agreed, a National Account
is deemed located in the Service Area in which the corporate headquarters of the
National Account is located. The Control Plan of a National Account is the Plan
in whose Service Area the National Account is located. A participating ("Par")
Plan is a Plan in whose Service Area the National Account has employee and/or
retiree locations, but in which the National Account is not located.
3. The National Account Guidelines enunciated herein below shall be applicable
only with respect to the business of new National Accounts acquired after
January 1, 1991.
4. Control Plans shall utilize National Account identification cards complying
with then currently effective BCBSA graphic standards in connection with all
National Accounts business to facilitate administration thereof, to minimize
subscriber and provider confusion, and to reflect a commitment to cooperation
among Plans.
5. Disputes among Plans and/or BCBSA as to the interpretation or implementation
of these Guidelines or as to other National Accounts issues shall be submitted
to mediation and mandatory dispute resolution as provided in the License
Agreement. For two years from the effective date of the License Agreement,
however, such disputes shall be subject to mediation only, with the results of
such mediation to be collected and reported in order to establish more
definitive operating parameters for National Accounts business and to serve as
ground rules for future binding dispute resolution.
EXHIBIT 3
Page 2 of 3
6. The Control Plan may use the BlueCard Program (as defined by IPOC) to deliver
benefits to employees and non-Medicare eligible retirees in a Participating
Plan's service area if an alternative arrangement with the Participating Plan
cannot be negotiated. The Participating Plan's minimum servicing requirement for
those employees and non-Medicare retirees in its service area is to deliver
benefits using the BlueCard Program. Account delivery is subject to the
policies, provisions and procedures of the BlueCard Program.
7. For provider payments in a Participating Plan's area (on non-BlueCard
claims), payment to the provider may be made by the Participating Plan or the
Control Plan at the Participating Plan's option. If the Participating Plan
elects to pay the provider, it may not withhold payment of a claim verified by
the Control Plan or its designated processor, and payment must be in conformity
with service criteria established by the Board of Directors of BCBSA (or an
authorized committee thereof) to assure prompt payment, good service and minimum
confusion with providers and subscribers. The Control Plan, at the Participating
Plan's request, will also assure that measures are taken to protect the
confidentiality of the data pertaining to provider reimbursement levels and
profiles.
8. For claim payments in a Participating Plan's area (on non-BlueCard claims),
Participating Plans are strongly encouraged, but not required, to pass along to
the Control Plan part or all of local provider discounts and differentials for
use by the Control Plan in negotiating financial arrangements with National
Accounts. However, since the size, basis, form and use of local differentials
can vary substantially among Plans and also by individual National Account
characteristics, the degree and form of any discount or differential passed
along to the Control Plan shall be strictly a matter of negotiated contractual
agreement between a Participating Plan and the Control Plan and may also vary
from one National Account to another. In order to facilitate the quotation of
national account pricing and the offering of a variety of National Account
delivery systems, all Plans are strongly encouraged to periodically publish to
other Plans and the BCBSA their National Account contracting policies with
respect to the handling of differentials.
The Control Plan, in its financial agreements with a National Account,
is expected to reasonably reflect the aggregate amount of differentials passed
along to the Control Plan by all Participating Plans in a National Account. The
exact form and substance of this may vary from one National Account to another
and shall be a matter of
Amended as of June 14, 1996
EXHIBIT 3
Page 3 of 3
explicit negotiation and contractual relationship between the National Account
and the Control Plan. The specifics in an agreement between the Control Plan and
the National Account may vary in form (e.g., a guaranteed offset against
retentions, or a direct pass through, or a guaranteed aggregate percentage
discount, or no pass back at all, etc.), and the Control Plan has the
responsibility and the Authority to negotiate precise arrangements. However,
irrespective of the final arrangements between the Control Plan and the National
Account, a Participating Plan's liability for passing along differentials shall
be limited to the contractual agreement the Participating Plan has with the
Control Plan on a specific National Account.
9. Other than in contracting with health care providers or soliciting such
contracts in areas contiguous to a Plan's Service Area in order to serve its
subscribers or those of its licensed Controlled Affiliate residing or working in
its Service Area, a Control Plan may not use the Licensed Marks and/or Name, as
a tag line or otherwise, to negotiate directly with providers outside its
Service Area.
EXHIBIT 4
GOVERNMENT PROGRAMS AND CERTAIN OTHER USES
Page 1 of 2
1. A Plan and its licensed Controlled Affiliate may use the Licensed Marks and
Name in bidding on and executing a contract to serve a Government Program, and
in thereafter communicating with the Government concerning the Program. With
respect, however, to such contracts entered into after the 1st day of January,
1991, the Licensed Marks and Name will not be used in communications or
transactions with beneficiaries or providers in the Government Program located
outside a Plan's Service Area, unless the Plan can demonstrate to the
satisfaction of BCBSA's governing body that such a restriction on use of the
Licensed Marks and Name will jeopardize its ability to procure the contract for
the Government Program. As to both existing and future contracts for Government
Programs, Plans will discontinue use of the Licensed Marks and Name as to
beneficiaries and Providers outside their Service Area as expenditiously as
circumstances reasonably permit. Effective January 1, 1995, except as provided
in the first sentence above, all use by a Plan of the Licensed Marks and Name in
Government Programs outside of the Plan's Service Area shall be discontinued.
Incidental communications outside a Plan's Service Area with resident or former
resident beneficiaries of the Plan, and other categories of necessary incidental
communications approved by BCBSA, are not prohibited.
2. In connection with activity otherwise in furtherance of the License
Agreement, a Plan may use the Licensed Marks and Name outside its Service Area
in the following circumstances which are deemed legitimate and necessary and not
likely to cause consumer confusion:
a. sending letterhead, envelopes, and similar items for
administrative purposes which do not solicit the sale of
health care plans and related services;
b. distributing business cards other than in marketing and
selling;
c. contracting with health care providers or soliciting
such contracts in areas contiguous to a Plan's Service
Area in order to serve its subscribers or those of its
licensed Controlled Affiliate residing or working in its
service area;
d. issuing a small sign containing the legal name or trade
name of the Plan or its licensed Controlled Affiliate
for display by a provider to identify the latter as a
participating provider of the Plan or Controlled
Affiliate;
EXHIBIT 4
Page 2 of 2
e. advertising in publications or electronic media solely
to persons for employment;
f. advertising in print, electronic or other media which
serve, as a substantial market, the Service Area of the
Plan or licensed Controlled Affiliate, provided that no
Plan may advertise outside its Service Area on the
national broadcast and cable networks and that
advertisements in national print media are limited to
the smallest regional edition encompassing the Service
Area;
g. advertising by direct mail where the addressee's zip
code plus 4 includes, at least in part, the Plan's
Service Area or that of a licensed Controlled Affiliate.
EXHIBIT 5
MEDIATION AND MANDATORY DISPUTE RESOLUTION (MMDR) RULES
The Blue Cross and Blue Shield Plans ("Plans") and the Blue Cross
Blue Shield Association ("BCBSA") recognize and acknowledge that the Blue Cross
and Blue Shield system is a unique nonprofit and for-profit system offering cost
effective health care financing and services. The Plans and BCBSA desire to
utilize Mediation and Mandatory Dispute Resolution ("MMDR") to avoid expensive
and time-consuming litigation that may otherwise occur in the federal and state
judicial systems. Even MMDR should be viewed, however, as methods of last
resort, all other procedures for dispute resolution having failed. Except as
otherwise provided in the License Agreements, the Plans, their Controlled
Affiliates and BCBSA agree to submit all disputes to MMDR pursuant to these
Rules and in lieu of litigation.
1. Initiation of Proceedings
A. Pre-MMDR Efforts
Before filing a Complaint to invoke the MMDR process, the CEO of a
complaining party, or his/her designated representative, shall undertake good
faith efforts with the other side(s) to try to resolve any dispute.
B. Complaint
To commence a proceeding, the complaining party (or parties) shall
provide by certified mail, return receipt requested, a written Complaint to the
BCBSA Corporate Secretary (which shall also constitute service on BCBSA if it is
a respondent) and to any Plan(s) and/or Controlled Affiliate(s) named therein.
The Complaint shall contain:
i. identification of the complaining party (or
parties) requesting the proceeding;
ii. identification of the respondent(s);
iii. identification of any other persons or entities
who are interested in a resolution of the dispute;
iv. a full statement describing the nature of the
dispute;
v. identification of all of the issues that are being
submitted for resolution;
Amended as of November 21, 1996
vi. the remedy sought;
vii. a statement as to whether the complaining party
(or parties) elect(s) first to pursue Mediation;
viii. any request, if applicable, that one or more
members of the Mediation Committee be
disqualified from the proceeding and the grounds
for such request;
ix. any request, if applicable, that the matter be
handled on an expedited basis and the reasons
therefor; and
x. a statement signed by the CEO of the complaining
party affirming that the CEO has undertaken
efforts, or has directed efforts to be
undertaken, to resolve the dispute before
resorting to the MMDR process.
The complaining party (or parties) shall file and serve with the Complaint
copies of all documents which the party (or parties) intend(s) to offer at the
Arbitration Hearing and a statement identifying the witnesses the party (or
parties) intend(s) to present at the Hearing, along with a summary of each
witness' expected testimony.
C. Answer
Within twenty (20) days after receipt of the Complaint, each
respondent shall serve on the BCBSA and on the complaining party (or parties)
and on the Chairman of the Mediation Committee;
i. a full Answer to the aforesaid Complaint;
ii. a statement of any Counterclaims against the
complaining party (or parties), providing with
respect thereto the information specified in
Paragraph 1.B., above;
iii. a statement as to whether the respondent elects
to first pursue Mediation;
iv. any request, if applicable, that one or more
members of the Mediation Committee be
disqualified from the proceeding and the grounds
for such request; and
v. any request, if applicable, that the matter be
handled on an expedited basis and the reasons
therefor.
The respondent(s) shall file and serve with the Answer or by the date of the
Initial Conference set forth in Paragraph 3.B., below, copies of all documents
which the respondent(s) intend(s) to offer at the Arbitration Hearing and a
statement identifying the witnesses the party (or parties) intend(s) to present
at the Hearing, along with a summary of each witness' expected testimony.
D. Reply To Counterclaim
Within ten (10) days after receipt of any Counterclaim, the
complaining party (or parties) shall serve on BCBSA and on the responding party
(or parties) and on the Chairman of the Mediation Committee, a Reply to the
Counterclaim. Such Reply must provide the same information required by Paragraph
1.C.
2. Mediation
A. Mediation Committee
To facilitate the mediation of disputes between or among BCBSA, the
Plans and/or their Controlled Affiliates, the BCBSA Board has established a
Mediation Committee. Mediation may be pursued in lieu of or in an effort to
obviate the Mandatory Dispute Resolution process, and all parties are strongly
urged to exhaust the mediation procedure.
B. Election To Mediate
If any party elects first to pursue Mediation, and if it appears to
the Corporate Secretary that the dispute falls within the jurisdiction of the
Mediation Committee, as set forth in Exhibit 5-A hereto, then the Corporate
Secretary will promptly furnish the Mediation Committee with copies of the
Complaint, Answer, Counterclaim and Reply to Counterclaim, and other documents
referenced in Paragraph 1, above.
C. Selection of Mediators
The parties shall promptly attempt to agree upon: (i) the number of
mediators desired, not to exceed three mediators; and (ii) the selection of the
mediator(s) who may include members of the Mediation Committee and/or
experienced mediators from an independent entity to mediate all disputes set
forth in the Complaint and Answer (and Counterclaim and Reply, if any). In the
event the parties cannot agree upon the number of mediators desired, that number
shall default to three. In the event the parties cannot agree upon the selection
of mediator(s), the Chairman will select the mediator(s), at least one of which
shall be an experienced mediator from an independent entity, consistent with the
provisions set forth in this Paragraph. No member of the Mediation Committee who
is a representative of any party to the Mediation may be selected to mediate the
dispute. The Chairman shall also endeavor not to select as a mediator any member
of the Mediation Committee whom a party has requested to be disqualified. If,
after due regard for availability, expertise, and such other considerations as
may best promote an expeditious Mediation, the Chairman
believes that he or she must consider for selection a member of the Mediation
Committee whom a party has requested to be disqualified, the other members of
the Committee eligible to be selected to mediate the dispute shall decide the
request for disqualification. By agreeing to participate in the Mediation of a
dispute, a member of the Mediation Committee represents to the party (or
parties) thereto that he or she knows of no grounds which would require his or
her disqualification.
D. Binding Decision
Before the date of the Mediation Hearing described below, the
Corporate Secretary will contact the party (or parties) to determine whether
they wish to be bound by any recommendation of the selected mediators for
resolution of the disputes. If all wish to be bound, the Corporate Secretary
will send appropriate documentation to them for their signatures before the
Mediation Hearing begins.
E. Mediation Procedure
The Chairman shall promptly advise the parties of a scheduled
Mediation Hearing date. Unless a party requests an expedited procedure, or
unless all parties to the proceeding agree to one or more extensions of time,
the Mediation Hearing set forth below shall be completed within forty (40) days
of BCBSA's receipt of the Complaint. The selected mediators, unless the parties
otherwise agree, shall adhere to the following procedure:
i. Each party must be represented by its CEO or other
representative who has been delegated full
authority to resolve the dispute. However,
parties may send additional representatives as
they see fit.
ii. By no later than five (5) days prior to the date
designated for the Mediation Hearing, each party
shall supply and serve a list of all persons who
will be attending the Mediation Hearing, and
indicate who will have the authority to resolve
the dispute.
iii. Each party will be given one-half hour to present
its case, beginning with the complaining party (or
parties), followed by the other party or parties.
The parties are free to structure their
presentations as they see fit, using oral
statements or direct examination of witnesses.
However, neither cross-examination nor questioning
of opposing representatives will be permitted. At
the close of each presentation, the selected
mediators will be given an opportunity to ask
questions of the presenters and witnesses. All
parties must be present throughout the Mediation
Hearing. The selected mediators may extend the
time allowed for each party's presentation at the
Mediation Hearing. The selected mediators may
meet in executive session, outside the presence of
the parties, or may meet with the parties
separately, to discuss the controversy.
iv. After the close of the presentations, the parties
will attempt to negotiate a settlement of the
dispute. If the parties desire, the selected
mediators, or any one or more of the selected
mediators, will sit in on the negotiations.
v. After the close of the presentations, the selected
mediators may meet privately to agree upon a
recommendation for resolution of the dispute which
would be submitted to the parties for their
consideration and approval. If the parties have
previously agreed to be bound by the results of
this procedure, this recommendation shall be
binding upon the parties.
vi. The purpose of the Mediation Hearing is to assist
the parties to settle their grievances short of
mandatory dispute resolution. As a result, the
Mediation Hearing has been designed to be as
informal as possible. Rules of evidence shall not
apply. There will be no transcript of the
proceedings, and no party may make a tape
recording of the Mediation Hearing.
vii. In order to facilitate a free and open discussion,
the Mediation proceeding shall remain
confidential. A "Stipulation to Confidentiality"
which prohibits future use of settlement offers,
all position papers or other statements furnished
to the selected mediators, and decisions or
recommendations in any Mediation proceeding shall
be executed by each party.
viii. Upon request of the selected mediators, or one of
the parties, BCBSA staff may also submit
documentation at any time during the proceedings.
F. Notice Of Termination Of Mediation
If the Mediation cannot be completed within the prescribed or agreed
time period due to the lack of cooperation of any party, as determined by the
selected mediators, or if the Mediation does not result in a final resolution of
all disputes at the Mediation Hearing or within forty (40) days after the
Complaint was served, whichever comes first, any party or any one of the
selected mediators may so notify the Corporate Secretary, who shall promptly
issue a Notice of termination of mediation to all parties, to the selected
mediators, and to the MDR Administrator, defined below. Such notice shall serve
to bring the Mediation to an end and to initiate Mandatory Dispute Resolution.
Upon agreement of all parties and the selected mediators, the Mediation process
may continue at the same time the MDR process is invoked. The Notice described
above would serve to initiate the MDR proceeding and would not terminate the
proceedings.
3. Mandatory Dispute Resolution (MDR)
If all parties elect not to first pursue Mediation, or if a notice
of termination of Mediation is issued as set forth in Paragraph 2.F., above,
then the unresolved disputes set forth in any Complaint and Answer (and
Counterclaim and Reply, if any) shall be subject to MDR.
A. MDR Administrator
The Administrator shall be an independent entity such as the Center
for Public Resources, Inc. or Endispute, Inc., specializing in alternative
dispute resolution. The Administrator shall be designated initially, and may be
changed from time to time, by the affirmative vote of fifty-one (51) percent of
the Plans and fifty-one (51) percent of the total then current weighted vote of
all the Plans.
B. Initial Conference
Within five (5) days after a Notice of Termination has issued, or
within five (5) days after the time for filing and serving the Reply to any
Counterclaim if the parties elect first not to mediate, the parties shall confer
with the Administrator to discuss selecting a dispute resolution panel ("the
Panel"). This Initial Conference may be by telephone. The parties are encouraged
to agree to the composition of the Panel and to present that agreement to the
Administrator at the Initial Conference. If the parties do not agree on the
composition of the Panel by the time of the Initial Conference, or by any
extension thereof agreed to by all parties and the Administrator, then the Panel
Selection Process set forth in subparagraph C shall be followed.
C. Panel Selection Process
The Administrator shall designate at least seven potential
arbitrators. The exact number designated shall be sufficient to give each party
at least two peremptory strikes. Each party shall be permitted to strike any
designee for cause and the Administrator shall determine the sufficiency thereof
in its sole discretion. The Administrator will designate a replacement for any
designee so stricken. Each party shall then be permitted two peremptory strikes.
From the remaining designees, the Administrator shall select a three member
Panel. The Administrator shall set the dates for exercising all strikes and
shall complete the Panel Selection Process within fifteen (15) days of the
Initial Conference. Each Arbitrator shall be compensated at his or her normal
hourly rate or, in the absence of an established rate, at a reasonable hourly
rate to be promptly fixed by the Administrator for all time spent in connection
with the proceedings and shall be reimbursed for any travel and other reasonable
expenses.
D. Duties Of The Arbitrators
The Panel shall promptly designate a Presiding Arbitrator for the
purposes reflected below, but shall retain the power to review and modify any
ruling or other action of said Presiding Arbitrator. Each Arbitrator shall be an
independent Arbitrator, shall be governed by the Code of Ethics for Arbitrators
in Commercial Disputes, appended as Exhibit "5-B" hereto, and shall at or prior
to the commencement of any Arbitration Hearing take an oath to that effect. Each
Arbitrator shall promptly disclose in writing to the Panel and to the parties
any circumstances, whenever arising, that might cause doubt as to such
Arbitrator's compliance, or ability to comply, with said Code of Ethics, and,
absent resignation by such Arbitrator, the remaining Arbitrators shall determine
in their sole discretion whether the circumstances so disclosed constitute
grounds for disqualification and for replacement. With respect to such
circumstances arising or coming to the attention of a party after an
Arbitrator's selection, a party may likewise request the Arbitrator's
resignation or a determination as to disqualification by the remaining
Arbitrators. With respect to a sole Arbitrator, the determination as to
disqualification shall be made by the Administrator.
There shall be no ex parte communication between the parties or
their counsel and any member of the Panel.
E. Panel's Jurisdiction And Authority
The Panel's jurisdiction and authority shall extend to all disputes
between or among the Plans, their Controlled Affiliates, and/or BCBSA, except
for those disputes excepted from these MMDR procedures as set forth in the
License Agreements.
With the exception of punitive or treble damages, the Panel shall
have full authority to award the relief it deems appropriate to resolve the
parties' disputes, including monetary awards and injunctions, mandatory or
prohibitory. The Panel has no authority to award punitive or treble damages
except that the Panel may allocate or assess responsibility for punitive or
treble damages assessed by another tribunal. Subject to the above limitations,
the Panel may, by way of example, but not of limitation:
i. interpret or construe the meaning of any terms,
phrase or provision in any license between BCBSA
and a Plan or a Controlled Affiliate relating to
the use of the BLUE CROSS(R) or BLUE SHIELD(R)
service marks.
ii. determine whether BCBSA, a Plan or a Controlled
Affiliate has violated the terms or conditions of
any license between the BCBSA and a Plan or a
Controlled Affiliate relating to the use of the
BLUE CROSS(R) or BLUE SHIELD(R) service marks.
iii. decide challenges as to its own jurisdiction.
iv. issue such orders for interim relief as it deems
appropriate pending Hearing and Award in any
Arbitration.
It is understood that the Panel is expected to resolve
issues based on governing principles of law, preserving to the
maximum extent legally possible the continued integrity of the Licensed Marks
and the BLUE CROSS/BLUE SHIELD system. The Panel shall apply federal law to all
issues which, if asserted in the United States District Court, would give rise
to federal question jurisdiction, 28 U.S.C. ss. 1331. The Panel shall apply
Illinois law to all issues involving interpretation, performance or construction
of any License Agreement or Controlled Affiliate License Agreement unless the
agreement otherwise provides. As to other issues, the Panel shall choose the
applicable law based on conflicts of law principles of the State of Illinois.
F. Administrative Conference And Preliminary Arbitration
Hearing
Within ten (10) days of the Panel being selected, the Presiding
Arbitrator will schedule an Administrative Conference to discuss scheduling of
the Arbitration Hearing and any other matter appropriate to be considered
including: any written discovery in the form of requests for production of
documents or requests to admit facts; the identity of any witness whose
deposition a party may desire and a showing of exceptional good cause for the
taking of any such deposition; the desirability of bifurcation or other
separation of the issues; the need for and the type of record of conferences and
hearings, including the need for transcripts; the need for expert witnesses and
how expert testimony should be presented; the appropriateness of motions to
dismiss and/or for full or partial summary judgment; consideration of
stipulations; the desirability of presenting any direct testimony in writing;
and the necessity for any on-site inspection by the Panel.
G. Discovery
i. Requests for Production of Documents: All requests
for the production of documents must be served as
of the date of the Administrative Conference as
set forth in Paragraph 3.F., above. Within twenty
(20) days after receipt of a request for
documents, a party shall produce all relevant and
non-privileged documents to the requesting party.
In his or her discretion, the Presiding Arbitrator
may require the parties to provide lists in such
detail as is deemed appropriate of all documents
as to which privilege is claimed and may further
require in-camera inspection of the same.
ii. Requests for Admissions: Requests for Admissions
may be served up to 21 days prior to the
Arbitration Hearing. A party served with Requests
For Admissions must respond within twenty (20)
days of receipt of said request. The good faith
use of and response to Requests for Admissions is
encouraged, and the Panel shall have full
discretion, with reference to the Federal Rules of
Civil Procedure, in awarding appropriate sanctions
with respect to abuse of the procedure.
iii. Depositions As a general rule, the parties will
not be permitted to take deposition testimony for
discovery purposes. The Presiding Arbitrator, in
his or her sole discretion, shall have the
authority to permit a party to take such
deposition testimony upon a showing of exceptional
good cause, provided that no deposition, for
discovery purposes or otherwise, shall exceed
three (3) hours, excluding objections and colloquy
of counsel.
iv. Expert witness(es): If a party intends to present
the testimony of an expert witness during the oral
hearing, it shall provide all other parties with a
written statement setting forth the information
required to be provided by Fed. R. Civ. P.
26(b)(4)(A)(i) prior to the expiration of the
discovery period.
v. Discovery cut-off: The Presiding Arbitrator shall
determine the date on which the discovery period
will end, but the discovery period shall not
exceed forty-five (45) days from its commencement,
without the agreement of all parties.
vi. Additional discovery: Any additional discovery
will be at the discretion of the Presiding
Arbitrator. The Presiding Arbitrator is
authorized to resolve all discovery disputes,
which resolution will be binding on the parties
unless modified by the Arbitration Panel. If a
party refuses to comply with a decision resolving
a discovery dispute, the Panel, in keeping with
Fed. R. Civ. P. 37, may refuse to allow that party
to support or oppose designated claims or
defenses, prohibit that party from introducing
designated matters into evidence or, in extreme
cases, decide an issue submitted for resolution
adversely to that party.
H. Panel Suggested Settlement/Mediation
At any point during the proceedings, the Panel at the request of any
party or on its own initiative, may suggest that the parties explore settlement
and that they do so at or before the conclusion of the Arbitration Hearing, and
the Panel shall give such assistance in settlement negotiations as the parties
may request and the Panel may deem appropriate. Alternatively, the Panel may
direct the parties to endeavor to mediate their disputes as provided above, or
to explore a mini-trial proceeding, or to have an independent party render a
neutral evaluation of the parties' respective positions. The Panel shall enter
such sanctions as it deems appropriate with respect to any party failing to
pursue in good faith such Mediation or other alternate dispute resolution
methods.
I. Subpoenas On Third Parties
Pursuant to, and consistent with, the Federal Arbitration Act, 9
U.S.C. ss. 9 et seq., a party may request the issuance of a subpoena on a third
party, to compel testimony or documents, and, if good and sufficient cause is
shown, the Panel shall issue such a subpoena.
J. Arbitration Hearing
An Arbitration Hearing will be held within thirty (30) days after
the Administrative Conference if no discovery is taken, or within thirty (30)
days after the close of discovery, unless all parties and the Panel agree to
extend the Arbitration Hearing date, or unless the parties agree in writing to
waive the Arbitration Hearing. The parties may mutually agree on the location of
the Arbitration Hearing. If the parties fail to agree, the Arbitration Hearing
shall be held in Chicago, Illinois, or at such other location determined by the
Presiding Arbitrator to be most convenient to the participants. The Panel will
determine the date(s) and time(s) of the Arbitration Hearing(s) after
consultation with all parties and shall provide reasonable notice thereof to all
parties or their representatives.
K. Arbitration Hearing Memoranda
Twenty (20) days prior to the Arbitration Hearing, each party shall
submit to the other party (or parties) and to the Panel an Arbitration Hearing
Memorandum which sets forth the applicable law and any argument as to any
relevant issue. The Arbitration Hearing Memorandum will supplement, and not
repeat, the allegations, information and documents contained in or with the
Complaint, Answer, Counterclaim and Reply, if any. Ten (10) days prior to the
Arbitration Hearing, each party may submit to the other party (or parties) and
to the Panel a Response Arbitration Hearing Memorandum which sets forth any
response to another party's Arbitration Hearing Memorandum.
L. Notice For Testimony
Ten (10) days prior to the Arbitration Hearing, any party may serve
a Notice on any other party (or parties) requesting the attendance at the
Arbitration Hearing of any officer, employee or director of the other party (or
parties) for the purpose of providing noncumulative testimony. If a party fails
to produce one of its officers, employees or directors whose noncumulative
testimony during the Arbitration Hearing is reasonably requested by an adverse
party, the Panel may refuse to allow that party to support or oppose designated
claims or defenses, prohibit that party from introducing designated matters into
evidence or, in extreme cases, decide an issue submitted for mandatory dispute
resolution adversely to that party. This Rule may not be used for the purpose of
burdening or harassing any party, and the Presiding Arbitrator may impose such
orders as are appropriate so as to prevent or remedy any such burden or
harassment.
M. Arbitration Hearing Procedures
i. Attendance at Arbitration Hearing: Any person
having a direct interest in the proceeding is
entitled to attend the Arbitration Hearing. The
Presiding Arbitrator shall otherwise have the
power to require the exclusion of any witness,
other than a party or other essential person,
during the testimony of any other witness. It
shall be discretionary with the Presiding
Arbitrator to determine the propriety of the
attendance of any other person.
ii. Confidentiality: The Panel and all parties shall
maintain the privacy of the Arbitration
Proceeding. The parties and the Panel shall treat
the Arbitration Hearing and any discovery or other
proceedings or events related thereto, including
any award resulting therefrom, as confidential
except as otherwise necessary in connection with a
judicial challenge to or enforcement of an award
or unless otherwise required by law.
iii. Stenographic Record: Any party, or if the parties
do not object, the Panel, may request that a
stenographic or other record be made of any
Arbitration Hearing or portion thereof. The costs
of the recording and/or of preparing the
transcript shall be borne by the requesting party
and by any party who receives a copy thereof. If
the Panel requests a recording and/or a
transcript, the costs thereof shall be borne
equally by the parties.
iv. Oaths: The Panel may require witnesses to testify
under oath or affirmation administered by any duly
qualified person and, if requested by any party,
shall do so.
v. Order of Arbitration Hearing: An Arbitration
Hearing shall be opened by the recording of the
date, time, and place of the Arbitration Hearing,
and the presence of the Panel, the parties, and
their representatives, if any. The Panel may, at
the beginning of the Arbitration Hearing, ask for
statements clarifying the issues involved.
Unless otherwise agreed, the complaining party (or
parties) shall then present evidence to support
their claim(s). The respondent(s) shall then
present evidence supporting their defenses and
Counterclaims, if any. The complaining party (or
parties) shall then present evidence supporting
defenses to the Counterclaims, if any, and
rebuttal.
Witnesses for each party shall submit to questions
by adverse parties and/or the Panel.
The Panel has the discretion to vary these
procedures, but shall afford a full and equal
opportunity to all parties for the presentation of
any material and relevant evidence .
vi. Evidence: The parties may offer such evidence as
is relevant and material to the dispute and shall
produce such evidence as the Panel may deem
necessary to an understanding and resolution of
the dispute. Unless good cause is shown, as
determined by the Panel or agreed to by all other
parties, no party shall be permitted to offer
evidence at the Arbitration Hearing which was not
disclosed prior to the Arbitration Hearing by that
party. The Panel may receive and consider the
evidence of witnesses by affidavit upon such terms
as the Panel deems appropriate.
The Panel shall be the judge of the relevance and
materiality of the evidence offered, and
conformity to legal rules of evidence, other than
enforcement of the attorney-client privilege and
the work product protection, shall not be
necessary. The Federal Rules of Evidence shall be
considered by the Panel in conducting the
Arbitration Hearing but those rules shall not be
controlling. All evidence shall be taken in the
presence of the Panel and all of the parties,
except where any party is in default or has waived
the right to be present.
Settlement offers by any party in connection with
Mediation or MDR proceedings, decisions or
recommendations of the selected mediators, and a
party's position papers or statements furnished to
the selected mediators shall not be admissible
evidence or considered by the Panel without the
consent of all parties.
vii. Closing of Arbitration Hearing: The Presiding
Arbitrator shall specifically inquire of all
parties whether they have any further proofs to
offer or witnesses to be heard. Upon receiving
negative replies or if he or she is satisfied that
the record is complete, the Presiding Arbitrator
shall declare the Arbitration Hearing closed with
an appropriate notation made on the record.
Subject to being reopened as provided below, the
time within which the Panel is required to make
the award shall commence to run, in the absence of
contrary agreement by the parties, upon the
closing of the Arbitration Hearing.
With respect to complex disputes, the Panel may,
in its sole discretion, defer the closing of the
Arbitration Hearing for a period of up to thirty
(30) days after the presentation of proofs in
order to permit the parties to submit post-hearing
briefs and argument, as the Panel deems
appropriate, prior to making an award.
For good cause, the Arbitration Hearing may be
reopened for up to thirty (30) days on the Panel's
initiative, or upon application of a party, at any
time before the award is made
. N. Awards
An Award must be in writing and shall be made promptly by the Panel
and, unless otherwise agreed by the parties or specified by law, no later than
thirty (30) days from the date of closing the Arbitration Hearing. If all
parties so request, the Award shall contain findings of fact and conclusions of
law. The Award, and all other rulings and determinations by the Panel, may be by
a majority vote.
Parties shall accept as legal delivery of the Award the placing of
the Award or a true copy thereof in the mail addressed to a party or its
representative at its last known address or personal service of the Award on a
party or its representative.
Awards are binding only on the parties to the Arbitration and are
not binding on any non-parties to the Arbitration and may not be used or cited
as precedent in any other proceeding.
After the expiration of twenty (20) days from initial delivery, the
Award (with corrections, if any) shall be final and binding on the parties, and
the parties shall undertake to carry out the Award without delay.
Proceedings to confirm, modify or vacate an Award shall be conducted
in conformity with and controlled by the Federal Arbitration Act. 9 U.S.C.ss.1,
et seq.
O. Return Of Documents
Within sixty (60) days after the Award and the conclusion of any
judicial proceedings with respect thereto, each party and the Panel shall return
any documents produced by any other party, including all copies thereof. If a
party receives a discovery request in any other proceeding which would require
it to produce any documents produced to it by any other party in a proceeding
hereunder, it shall not produce such documents without first notifying the
producing party and giving said party reasonable time to respond, if
appropriate, to the discovery request.
4. Miscellaneous
A. Expedited Procedures
Any party to a Mediation may direct a request for an expedited
Mediation Hearing to the Chairman of the Mediation Committee, to the selected
Mediators, and to all other parties at any time. The Chairman of the Mediation
Committee, or at his or her direction, the then selected Mediators, shall grant
any request which is supported by good and sufficient reasons. If such a request
is granted, the Mediation shall be completed within as short a period as
practicable, as determined by the Chairman of the Mediation Committee or, at his
or her direction, the then selected Mediators.
Any party to an Arbitration may direct a request for expedited
proceedings to the Administrator, to the Panel, and to all other parties at any
time. The Administrator, or the Presiding Arbitrator if the Panel has been
selected, shall grant any such request which is supported by good and sufficient
reasons. If such a request is granted, the Arbitration shall be completed within
as short a time as practicable, as determined by the Administrator and/or the
Presiding Arbitrator.
B. Temporary Or Preliminary Injunctive Relief
Any party may seek temporary or preliminary injunctive relief with
the filing of a Complaint or at any time thereafter. If such relief is sought
prior to the time that an Arbitration Panel has been selected, then the
Administrator shall select a single Arbitrator who is a lawyer who has no
interest in the subject matter of the dispute, and no connection to any of the
parties, to hear and determine the request for temporary or preliminary
injunction. If such relief is sought after the time that an Arbitration Panel
has been selected, then the Arbitration Panel will hear and determine the
request. The request for temporary or preliminary injunctive relief will be
determined with reference to the temporary or preliminary injunction standards
set forth in Fed. R. Civ. P. 65.
C. Defaults And Proceedings In The Absence Of A Party
Whenever a party fails to comply with the MDR Rules in a manner
deemed material by the Panel, the Panel shall fix a reasonable time for
compliance and, if the party does not comply within said period, the Panel may
enter an Order of default or afford such other relief as it deems appropriate.
Arbitration may proceed in the event of a default or in the absence of any party
who, after due notice, fails to be present or fails to obtain an extension. An
Award shall not be made solely on the default or absence of a party, but the
Panel shall require the party who is present to submit such evidence as the
Panel may require for the making of findings, determinations, conclusions, and
Awards.
D. Notice
Each party shall be deemed to have consented that any papers,
notices, or process necessary or proper for the initiation or continuation of a
proceeding under these rules or for any court action in connection therewith may
be served on a party by mail addressed to the party or its representative at its
last known address or by personal service, in or outside the state where the MDR
proceeding is to be held.
The Corporate Secretary and the parties may also use facsimile
transmission, telex, telegram, or other written forms of electronic
communication to give the notices required by these rules.
E. Expenses
The expenses of witnesses shall be paid by the party causing or
requesting the appearance of such witnesses. All expenses of the MDR proceeding,
including compensation, required travel and other reasonable expenses of the
Panel, and the cost of any proof produced at the direct request of the Panel,
shall be borne equally by the parties and shall be paid periodically on a timely
basis, unless they agree otherwise or unless the Panel in the Award assesses
such expenses, or any part thereof against any party (or parties). In
exceptional cases, the Panel may award reasonable attorneys' fees as an item of
expense, and the Panel shall promptly determine the amount of such fees based on
affidavits or such other proofs as the Panel deems sufficient.
F. Disqualification Or Disability Of A Panel Member
In the event that any Arbitrator of a Panel with more than one
Arbitrator should become disqualified, resign, die, or refuse or be unable to
perform or discharge his or her duties after the commencement of MDR but prior
to the rendition of an Award, and the parties are unable to agree upon a
replacement, the remaining Panel member(s):
i. shall designate a replacement, subject to the
right of any party to challenge such replacement
for cause.
ii. shall decide the extent to which previously held
hearings shall be repeated.
If the remaining Panel members consider the proceedings to have
progressed to a stage as to make replacement impracticable, the parties may
agree, as an alternative to the recommencement of the Mandatory Dispute
Resolution process, to resolution of the dispute by the remaining Panel members.
In the event that a single Arbitrator should become disqualified,
resign, die, or refuse or be unable to perform or discharge his or her duties
after the commencement of MDR but prior to the rendition of an Award, and the
parties are unable to agree upon a replacement, the Administrator shall appoint
a successor, subject to the right of any party to challenge such successor for
cause, and the successor shall decide the extent to which previously held
proceedings shall be repeated.
G. Amendments
These MMDR Rules may be altered or amended from time to time by the
affirmative vote of fifty-one (51) percent of the Plans and fifty-one (51)
percent of the total then current weighted vote of all the Plans.
H. Extensions of Time
Any time limit set forth in these Rules may be extended upon
agreement of the parties and approval of: (i) the Chairman of the Mediation
Committee if the proceeding is then in Mediation; (ii) the Administrator if the
proceeding is in Arbitration, but no Arbitration Panel has been selected; or
(iii) the Arbitration Panel, if the proceeding is in Arbitration and the
Arbitration Panel has been selected.
I. Intervention
The Plans, their Controlled Affiliates, and BCBSA, to the extent
subject to MMDR pursuant to their License Agreements, shall have the right to
move to intervene in any pending Arbitration. A written motion for intervention
shall be made to: (i) the Administrator, if the proceeding is in Arbitration,
but no Arbitration Panel has been selected; or (ii) the Arbitration Panel, if
the proceeding is in Arbitration and the Arbitration Panel has been selected.
The written motion for intervention shall be delivered to the BCBSA Corporate
Secretary (which shall also constitute service on the BCBSA if it is a
respondent) and to any Plan(s) and/or Controlled Affiliate(s) which are parties
to the proceeding. Any party to the proceeding can submit written objections to
the motion to intervene. The motion for intervention shall be granted upon good
cause shown. Intervention also may be allowed by stipulation of the parties to
the Arbitration proceeding. Intervention shall be allowed upon such terms as the
Arbitration Panel decides.
J. BCBSA Assistance In Resolution of Disputes
The resources and personnel of the BCBSA may be requested by any
member Plan at any time to try to resolve disputes with another Plan.
K. Neutral Evaluation
The parties can voluntarily agree at any time to have an independent
party render a neutral evaluation of the parties' respective positions.
EXHIBIT 5-A
MEDIATION COMMITTEE
REPORTS TO: Board of Directors
CHARGE: 1. Develop and implement processes for resolving misunderstandings
or disagreements between Plans or between Plans and
the Association under the following circumstances:
a. Matters at issue regarding relationships between Plans or
between Plans and the Association.
b. Matters at issue regarding relationships between Plans or
between Plans and the Association.
c. Matters at issue under the Inter-Plan Bank, Reciprocity, and
Transfer Programs.
d. Matters at issue regarding contractor selection or
performance under the Medicare Part A Program.
2. Determination of equalization allowances and/or cost allowances
under FEP shall not be considered by this Committee.
MEMBERSHIP: Six to Eight
STAFF: Senior Vice President and General Counsel