Originally created 06/19/97

Insurance Commissioner set to ask for HMO control

Georgia Insurance Commissioner John Oxendine will move in Fulton County Superior Court Thursday to take over Jeanette Garrison's health maintenance organization company.

The Insurance Commissioner was cleared to go to a state court Wednesday when U.S. District Judge Dudley H. Bowen Jr. lifted the stay that had kept the Augusta-based Master Health Plan Inc. out of the grasp of the state Insurance Commissioner.

"It was obviously a significant victory," Mr. Oxendine said of Judge Bowen's ruling Wednesday. "That sends the message to everyone else that you have to follow the state laws governing insurance."

Earlier this month, U.S. Bankruptcy Court Judge John S. Dalis ruled against Master Health Plan Inc. which had sought to file a Chapter 11 bankruptcy to starve off the state's Insurance Commissioner's intention to gain control of the company.

Judge Dalis agreed with the Insurance Commissioner, however, that under state law, HMO's are legally considered "domestic insurance companies," and under bankruptcy law, insurance companies cannot file for bankruptcy. Attorneys for Master Health Plan sought an emergency request to Judge Bowen, asking him to stay Judge Dalis' ruling.

Wednesday, Judge Bowen agreed with Judge Dalis' reasoning. The state law and federal bankruptcy laws are clear, an HMO in Georgia cannot file for bankruptcy, Judge Bowen wrote.

Although the bankruptcy court could manage a rehabilitation of Master Health Plan more effectively, Judge Bowen wrote, federal courts must defer to state law.

The Insurance Commissioner has already filed a petition in Fulton County Superior Court seeking permission to take over Master Health Plan and straighten out its finances. It's the first time the Insurance Commissioner will have taken such an action.

"In my opinion, the company can be saved. The company isn't bankrupt," Mr. Oxendine said. "(But) the company has not been run very well, to be blunt."

Mr. Oxendine said Wednesday evening that he planned to make a detailed announcement this morning about what he intends to do about Master Health Plan to ensure it gets back on solid financial ground and provides quality service.

Master Health Plan attorney John Long said Wednesday evening that there was nothing wrong with the Insurance Commissioner's handling of the company's rehabilitation as long as the company isn't liquidated.

Plans to sell the company had been underway, and the company officials believe they could sell the company for more money and repay all creditors better than the Insurance Commissioner could, Mr. Long said. He hopes the two sides will be able to work out an agreement to proceed in an orderly fashion.

"The bottom line is what will happen to the company," Mr. Long said.


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