State of Oregon Department of Consumer & Business Services
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STATE OF OREGON DEPARTMENT OF CONSUMER & BUSINESS SERVICES DIVISION OF FINANCIAL REGULATION REPORT OF FINANCIAL EXAMINATION OF REGENCE HEALTH MAINTENANCE OF OREGON, INC. PORTLAND, OREGON AS OF DECEMBER 31, 2017 STATE OF OREGON DEPARTMENT OF CONSUMER AND BUSINESS SERVICES DIVISION OF FINANCIAL REGULATION REPORT OF FINANCIAL EXAMINATION OF REGENCE HEALTH MAINTENANCE OF OREGON, INC. PORTLAND, OREGON NAIC COMPANY CODE 96250 AS OF DECEMBER 31, 2017 TABLE OF CONTENTS SALUTATION................................................................................................................................... 3 SCOPE OF EXAMINATION......................................................................................................... 4 COMPANY HISTORY.................................................................................................................... 5 Capitalization....................................................................................................................................6 Dividends and Other Distributions................................................................................................6 CORPORATE RECORDS..............................................................................................................6 Board Minutes.................................................................................................................................. 6 Articles of Incorporation................................................................. 7 Bylaws.............................................................................................................................................. 7 MANAGEMENT AND CONTROL............................................................................................. 8 Board of Directors...........................................................................................................................8 Officers.............................................................................................................................................. 8 Conflict of Interest...........................................................................................................................9 Insurance Company Holding System............................................................................................ 9 INTERCOMPANY AGREEMENTS.......................................................................................... 13 FIDELITY BOND AND OTHER INSURANCE......................................................................14 TERRITORY AND PLAN OF OPERATION..........................................................................15 GROWTH OF THE COMPANY.................................................................................................15 REINSURANCE.............................................................................................................................. 16 ACCOUNTS AND RECORDS..................................................................................................... 16 STATUTORY DEPOSITS.............................................................................................................16 COMPLIANCE WITH PRIOR EXAMINATION RECOMMENDATIONS..................16 SUBSEQUENT EVENTS...............................................................................................................16 FINANCIAL STATEMENTS....................................................................................................... 17 ASSETS ............................................................................................................................................18 LIABILITIES, CAPITAL AND SURPLUS ..................................................................................19 RECONCILIATION OF SURPLUS SINCE THE LAST EXAMINATION..............................21 NOTES TO FINANCIAL STATEMENTS............................................................................... 22 Note 1 - Invested Assets................................................................................................................22 Note 2 - Actuarial Reserves......................................................................................................... 22 SUMMARY OF COMMENTS AND RECOMMENDATIONS..........................................22 CONCLUSION................................................................................................................................ 23 ACKNOWLEDGMENT................................................................................................................24 AFFIDAVIT......................................................................................................................................25 SALUTATION February 19, 2019 Honorable Cameron Smith, Direetor Department of Consumer and Business Serviees State of Oregon 350 Winter Street NE Salem, Oregon 97301-3883 Dear Director; In accordance with your instructions and guidelines in the National Association of Insurance Commissioners (NAIC) Examiners Handbook, pursuant to ORS 731.300 and 731.302, respectively, we have examined the business affairs and financial condition of REGENCE HEALTH MAINTENANCE OF OREGON, INC. 100 SW Market Street Portland, Oregon 97204 NAIC Company Code 96250 hereinafter referred to as the "Company" or "Plan." The following report is respectfully submitted. Regence Health Maintenance of Oregon, Inc. SCOPE OF EXAMINATION We have perfonned our regular, triennial, multi-state examination of Regence Health Maintenance of Oregon, Inc., conducted with the insurance regulators from the States of Idaho, Utah and Washington, for the coordinated examination of insurers under Gambia Health Solutions, Inc. (“Gambia”). Oregon was designated as the lead State. The examination was conducted in conjunction with the examination of eight affdiated health care service contractors and two life and health insurers. A separate Report of Examination will be prepared for each entity. The last examination of this health care service contractor was completed as of December 31, 2014. The current examination covers the period of January 1, 2015 to December 31, 2017. We conducted our examination pursuant to ORS 731.300 and in accordance with ORS 731.302(1), which allows the examiners to consider the guidelines and procedures in the NAIG Financial Condition Examiners Handbook. The handbook requires that we plan and perform the examination to evaluate the financial condition and identify prospective risks of the Plan by obtaining information about the Plan, including corporate governance, identifying and assessing inherent risks within the Plan, and evaluating system controls and procedures used to mitigate those risks. An examination also includes identifying and evaluating significant risks that could cause an insurer's surplus to be materially misstated both currently and prospectively. All accounts and activities of the Plan were considered in accordance with the risk focused examination process. This may include assessing significant estimates made by management and evaluating management's compliance with Statutory Accounting Principles. The examination does not attest to the fair presentation of the financial statements included herein. If, during the course of the examination an adjustment is identified, the impact of such adjustment will be documented separately following the Plan's financial statements. Regence Health Maintenance of Oregon, Inc. This examination report ineludes signifieant findings of fact, as mentioned in ORS 731.302 and general information about the insurer and its financial condition. There may be other items identified during the examination that, due to their nature (e.g., subjective conclusions, proprietary infomiation, etc.), are not included within the examination report but separately communicated to other regulators and/or the Plan. COMPANY HISTORY On November 27, 1985, BlueCross and BlueShield of Oregon (BCBSO) formed a for-profit stock subsidiary named NetWork Health Plan, Inc., incorporated with the funding of a one million dollars ($1,000,000) capital contribution. On September 11, 1986, this company's name was changed to Health Maintenance of Oregon, Inc. The company received its Certificate of Authority to transact business as a domestic health care service contractor from the Division of Financial Regulation on November 19, 1986, under ORS Chapter 750. On March 2, 1987, the Company became a federally qualified, state registered, health maintenance organization. On September 8, 1997, the company adopted its current name. From its inception until 1988, the Company operated independently. Effective November 15, 1988, Regence HMO Oregon (fonnerly known as Capitol Health Care, Inc.) entered into a "Plan and Agreement of Acquisition" with BCBSO. The agreement named BCBSO as HMO Oregon's sole corporate member and gave BCBSO the authority to appoint the chairman of the Board of Directors, approve all directors, budgets, changes in product lines and amendments to Bylaws and Articles of Incorporation. Under the ternis of the agreement, BCBSO transferred 100% of the issued and outstanding shares of stock of the Plan to its indirectly owned subsidiary, Capitol Health Care Management, Inc., a subsidiary of HMO Oregon. Regence Health Maintenance of Oregon, Inc. On April 17, 1995, a public benefit corporation was formed under the name ENTRUST, which changed its name to The Benchmark Group on June 27, 1995. It was formed as a holding company to perform administrative