Did Maryland's prepaid dental plans have to follow the general Insurance Code, or just their own special dental-plan law?

Plain-English summary

In 1987, Maryland's Insurance Commissioner asked the Attorney General how the state's 1984 Dental Plan Organization Act, which licensed and regulated prepaid dental plans under Subtitle 42 of Article 48A, related to the rest of the Insurance Code. The Commissioner wanted to know whether a dental plan licensed under Subtitle 42 was subject to all, some, or none of the remainder of Article 48A.

The Attorney General concluded that dental plans were "insurers" within the meaning of the Insurance Code, since they collected premium-like fees, indemnified enrollees against the cost of dental care, and spread that risk across a large pool of participants, matching the elements of insurance the office had identified in an earlier opinion. Because the General Assembly had expressly exempted certain other entities, like fraternal benefit societies and non-profit health service plans, from the rest of the Insurance Code but included no comparable exemption for Subtitle 42 dental plans, the opinion concluded the omission was intentional. So dental plans were subject to the whole Insurance Code, except that a more specific Subtitle 42 provision, such as its own surplus or bonding requirements, would control over a more general provision on the same subject elsewhere in the Code, consistent with Article 48A's own rule that a specific provision governs over a general one.

Currency note

This opinion was issued in 1987. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Were Maryland prepaid dental plans regulated only by their own dental-plan law, or by the whole Insurance Code?
According to this 1987 opinion, dental plans licensed under Subtitle 42 were insurers generally subject to the rest of the Insurance Code, not just their own subtitle, except where Subtitle 42 itself set a more specific rule on the same subject.

Why did the Attorney General conclude prepaid dental plans counted as "insurers"?
The opinion found dental plans matched the elements of insurance this office had identified before: they collected fees like premiums, assumed the risk of high-cost dental care, and spread that risk among a large group of enrollees in exchange for a periodic payment.

Could the Insurance Commissioner regulate a dental plan's rulemaking, licensing, and enforcement the same way as other insurers?
The opinion concluded yes, for anything Subtitle 42 didn't specifically address differently, including the Commissioner's general rulemaking and subpoena authority and the Unfair Trade Practices Act, because the General Assembly had not written a Subtitle 42 exemption the way it had for fraternal benefit societies and non-profit health service plans.

Background and statutory framework

The General Assembly enacted the Dental Plan Organization Act as Chapter 603 of the Laws of Maryland 1984, codified as Subtitle 42 of Article 48A, after testimony (including from the Maryland State Dental Association) about prepaid dental plans nationwide that collapsed with liabilities vastly exceeding their assets, leaving thousands of enrollees without coverage. The Act's legislative history described its purpose as providing "financial and other protection to subscribers of prepaid dental plans" and giving the Insurance Commissioner authority to regulate all such plans except those covered by ERISA.

The opinion first asked whether a Subtitle 42 dental plan was an "insurer" under Article 48A, §3, applying the five elements of insurance the office had identified in a 1978 opinion (an insurable interest, a risk of loss, the insurer's assumption of that risk, a general risk-distribution scheme, and payment of a premium). Finding dental plans met those elements, the opinion turned to whether the General Assembly meant Subtitle 42 to be a complete, standalone scheme or one operating alongside the rest of the Insurance Code. Because the General Assembly had written explicit, sweeping exemptions from the rest of the Insurance Code for fraternal benefit societies (Article 48A, §305) and non-profit health service plans (Article 48A, §354(a)), but wrote no comparable exemption into Subtitle 42, the opinion concluded, applying the statutory-construction principle from Kaczorowski v. City of Baltimore, that the omission reflected a deliberate legislative choice. The opinion also pointed to Subtitle 42's own references to the Commissioner's rulemaking authority (in the grounds for suspending a certificate of authority under §593(a)(7)) as evidence the General Assembly assumed the Commissioner's general Article 48A powers, including rulemaking under §26, would still apply, since Subtitle 42 itself granted no independent rulemaking power. Applying Article 48A, §11's rule that a specific insurance provision controls over a general one on the same subject, the opinion concluded that only where Subtitle 42 set its own specific rule, such as the dental-plan surplus and bonding requirements in §586, would that specific provision displace an otherwise-applicable general Insurance Code requirement.

Citations

Statutes:

• Article 48A, §2 (definition of "insurance")
• Article 48A, §3 (definition of "insurer")
• Article 48A, §9 (exempts Subtitle 19 and 20 entities from general Insurance Code regulation)
• Article 48A, §11 (specific insurance provisions control over general ones on the same subject)
• Article 48A, §26 (Insurance Commissioner's general rulemaking authority)
• Article 48A, §27 (Commissioner's subpoena power)
• Article 48A, §47, §48 (general capital and surplus requirements for insurers)
• Article 48A, §221 (penalty for fraudulently filed financial statements)
• Article 48A, §230, §230A (penalties for illegally collected premiums and refusal to pay providers)
• Article 48A, §305 (exempts fraternal benefit societies from the rest of the Insurance Code)
• Article 48A, §354(a) (exempts non-profit health service plans from the rest of the Insurance Code)
• Article 48A, §581(b), §581(c), §581(d) (Subtitle 42 definitions of dental plan, dental plan organization, and dental services)
• Article 48A, §583, §585, §586, §586(c), §588, §590, §593, §593(a), §593(a)(7), §594, §595 (Subtitle 42's certificate of authority, surplus, investigation, reporting, and enforcement provisions)
• HO §4-101(e) (definition of the practice of dentistry, cross-referenced by Subtitle 42)
• Chapter 603, Laws of Maryland 1984 (enacted the Dental Plan Organization Act)

Cases:

• Kaczorowski v. City of Baltimore, 309 Md. 505, 513 (1987)
• Equitable Trust Company v. State Commission on Human Relations, 287 Md. 80, 86 (1980)
• Management Personnel Services v. Sandefur, 300 Md. 332, 341 (1984)
• Lumbermen's Mutual Casualty Co. v. Insurance Commissioner, 302 Md. 248 (1985)
• Insurance Commissioner v. Blue Shield of Maryland, 295 Md. 496 (1983)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1987/Volume72_1987.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

INSURANCE

Dental Plans—Dental Plans Licensed Pursuant To Subtitle 42 Of Article 48A Are Generally Subject To Requirements Of Insurance Code As A Whole.

September 18, 1987

The Honorable Edward J. Muhl
Insurance Commissioner
Department of Licensing and Regulation

You have requested our opinion concerning the relationship of Subtitle 42 of Article 48A, the Dental Plan Organization Act, with other elements of Article 48A, the Insurance Code. Specifically, you ask whether a dental plan organized and licensed pursuant to Subtitle 42 "is subject to all, a portion, or none of the remainder of Article 48A."

For the reasons stated below, we conclude that dental plans licensed pursuant to Subtitle 42 of Article 48A are generally subject to requirements codified elsewhere in the Insurance Code, except to the extent that a provision in Subtitle 42 is more specific than a requirement on the same subject elsewhere in the Insurance Code.

I
Introduction

In 1984, the General Assembly enacted the Dental Plan Organization Act, Chapter 603 of the Laws of Maryland 1984, codified as Subtitle 42 of Article 48A.1 The Act's title states its purpose as broadly "providing for the regulation of prepaid dental plans. . . ." "Dental plans" are defined in Subtitle 42 as "any contractual arrangement for dental services provided, arranged for, or administered directly on a prepaid, postpaid individual, or group capitation basis." §581(b). A "dental plan organization" is defined as "any person who undertakes to provide directly, arranges for, or administers a dental plan that provides dental services." §581(c).2

Dental plans, whether formed pursuant to Subtitle 42 or offered by a traditional insurer, generally operate in a similar manner. The dental plan organization enters into a contract with participating dental care providers, who agree to provide dental care to plan enrollees at reduced rates. These rates generally are prearranged between the plan and providers and are not subject to negotiation by enrollees.

In exchange for providing low cost dental care to the plan's enrollees, each provider receives payment from the plan. This payment may be fixed or variable, the latter based upon the number of enrollees who visit the particular provider within the payment period.

A plan negotiates either group or individual contracts with enrollees, who are charged a specific fee on a monthly, yearly, or other periodic basis. The enrollee is then entitled to receive dental services for the term of the contract. Fees to enrollees under these plans are generally much lower than the expense of traditional dental care, because the overall cost of providing the dental services is spread among large numbers of enrollees.

II
Legislative History of the Dental Plan Organization Act

The legislative history of House Bill 281, which was enacted as Chapter 603 of the Laws of Maryland 1984, is sparse. However, that history reveals the General Assembly's preeminent concern: that these plans be adequately regulated.

Testimony from proponents of House Bill 281, including the Maryland State Dental Association, graphically pointed out the need for regulation of dental plans. The Dental Association testified that unchecked and unregulated dental plans have been havens for unscrupulous and possibly criminal behavior nationwide. Examples were given of plans organized in Pennsylvania, one of which closed its doors with $1 billion in liabilities and less than $100,000 in assets, leaving 2,700 patients without the care for which they had contracted. Similarly, a California plan closed in 1982, leaving behind 70,000 participants. The plan had $250,000 in assets and $10 billion in liabilities at the time it closed. The Dental Association's testimony described numerous other plans nationwide that failed due to lack of regulatory control.

House Bill 281 was intended to prevent a comparable problem from arising in Maryland: "The purpose of this bill is to provide financial and other protection to subscribers of prepaid dental plans." Report of the Senate Economic Affairs Committee, Summary of Committee Report (House Bill 281), at 2 (1984). To that end, "The Insurance Commissioner would have authority to regulate all pre-paid dental plans in Maryland, except ERISA regulated plans." Summary at 1.

Hence, we have clear evidence that the General Assembly was aware of the urgent need for regulatory control of dental plans in Maryland. Moreover, it specifically intended that the Insurance Commissioner exercise his regulatory powers to protect the consuming public and to provide the necessary oversight for dental plan operations.3

III
Harmonization of Subtitle 42 with Article 48A

A. Dental Plans as "Insurers"

A threshold question in making the determination of whether Subtitle 42 entities are subject to the remainder of the Insurance Code is whether a dental plan, as defined in Subtitle 42, is an "insurer" within the meaning of Article 48A, §3.4 We conclude that, although dental plans also engage in providing certain health care services, the plans themselves are primarily engaged in the business of insurance and are, therefore, "insurers."

"Insurance" is defined as "a contract whereby one undertakes to indemnify another or pay or provide a specified or determinable amount or benefit upon determinable contingencies." Article 48A, §2. Historically, determining the precise boundaries of insurance has proved to be quite difficult. See 63 Opinions of the Attorney General 422, 424 (1978). In that opinion, the Attorney General identified five elements characterizing a contract of insurance:

"(a) The insured possesses an interest of some kind susceptible of pecuniary estimation, known as an insurable interest.
(b) The insured is subject to a risk of loss through the destruction or impairment of that interest by the happening of designated perils.
(c) The insurer assumes that risk of loss.
(d) Such assumption is part of a general scheme to distribute actual losses among a large group of persons bearing somewhat similar risks.
(e) As consideration for the insurer's promise, the insured makes a ratable contribution, called a premium, to a general insurance fund." 63 Opinions of the Attorney General at 425 (quoting Vance, Law of Insurance §1 (3rd ed. 1951)) (emphasis omitted).

See also 55 Opinions of the Attorney General 196, 198 (1970).

Dental plans collect fees, akin to insurance premiums; indemnify participants against the risk of high cost dental care; and pay a specified or determinable benefit on behalf of each participant upon the determinable contingency of necessary dental care. Accordingly, we conclude, they are engaged in the business of insurance. Indeed, the entire premise behind dental plan operations is to spread the "risk" of high cost care among as large a number of participants as possible. As this office previously stated: "Distribution of risk of loss among a large group of persons bearing somewhat similar risks lies at the heart of the concept of insurance." 63 Opinions of the Attorney General at 425.

That opinion determined that a prepaid dental plan, operating prior to the enactment of Subtitle 42, was engaged in the business of insurance. In reaching that conclusion, the Attorney General observed that the plan, "whether sold on either an individual or group basis, meets the statutory definition of insurance and also contains the paramount elements of insurance." Those "elements" were identified as:

"1. The assumption of a binding obligation to pay benefits which are fixed or determinable upon the happening of certain events which are for the most part beyond the control of the insured;

2. Its use of the application of the law of large numbers;
3. The payment of a premium to make it function;
4. Clear disparity in bargaining power between the members and the plan; and
5. Its potential for deception and misleading public solicitation as well as the danger of financial insolvency." 63 Opinions of the Attorney General at 426.

Dental plans organized pursuant to Subtitle 42 contain precisely the elements of insurance enumerated above and therefore are providing "insurance", as defined in Article 48A, §2. Accordingly, dental plans are "insurers."

B. Scope of Regulation

As insurers, dental plans are subject to regulation under Article 48A unless the General Assembly has exempted the plans from its scope. We find no basis for the conclusion that the General Assembly intended to create a blanket exemption from the rest of the Insurance Code for Subtitle 42 dental plans.

When interpreting a statute, the primary concern is to ascertain and carry out the legislative "purpose, aim, or policy." Kaczorowski v. City of Baltimore, 309 Md. 505, 513 (1987). See also, e.g., Equitable Trust Company v. State Commission on Human Relations, 287 Md. 80, 86 (1980). We have already determined that the overriding concern of the General Assembly was to provide regulation for dental plans in order to protect the public. See Part II above.

Had the General Assembly concluded that this goal could be achieved even though some or all dental plans were to be exempt from the remainder of the Insurance Code, we believe that it would have set out the exemption explicitly within the four corners of the statute. Indeed, in other situations the General Assembly has fashioned precisely this type of exemption. Organizations created pursuant to Subtitle 19 (fraternal benefit societies) and Subtitle 20 (non-profit health service plans) are specifically exempt from the remainder of the Insurance Code. Article 48A, §305 exempts fraternal benefit societies:

"Except as herein provided, societies shall be governed by this subtitle and Title 6, Subtitle 4 of the Corporations and Associations Article and shall be exempt from all other provisions of the insurance laws of this State, not only in governmental relations with the State, but for every other purpose. No law hereafter enacted shall apply to them, unless they be expressly designated therein."

Similarly, §354(a) provides:

"Any corporation without capital stock heretofore or hereafter organized for the purpose of establishing, maintaining and operating a non-profit health service plan . . . shall be governed and regulated by the provision of this subtitle, and by no other law relating to insurance unless such law is referred to under this subtitle, and no law hereafter enacted shall apply to such corporations unless they are expressly designated therein, and specifically refer to such corporations."

To further stress the fact that these exemptions are to be interpreted as all-encompassing, the General Assembly enacted §9, which unequivocally exempts Subtitle 19 and 20 entities from the general regulation of the Insurance Code.

Had the General Assembly intended to create a similar exemption for dental plans, it could have, and, we believe would have, done so. We conclude that comparable language is not within Subtitle 42 because the General Assembly intended no such exemption.

To be sure, the General Assembly created a relatively comprehensive regulatory scheme for dental plans.5 Nevertheless, Subtitle 42 and the remainder of Article 48A are complementary, rather than mutually exclusive. Where possible, statutes "which deal with the same subject matter must be construed together if they are not inconsistent with one another. Thus, to the extent possible, full effect should be given to each." Management Personnel Services v. Sandefur, 300 Md. 332, 341 (1984). It is possible, in this case, to give full effect to all applicable provisions.

To the extent that Subtitle 42 contains more specific provisions than similar provisions in the remainder of the Insurance Code, the specific provisions relating to dental plans will control over provisions relating to insurers generally. This construction carries out the mandate of Article 48A, §11, which provides:

"Provisions of this article relative to a particular kind of insurance or a particular matter shall prevail over provisions relating to insurance in general or insurers in general or to such matter in general."

For example, §586 sets out dental plan surplus or bond requirements. This will control, rather than §§47 and 48, which deal with capital and surplus requirements generally.

However, in instances where Subtitle 42 is silent, the general provisions will control, for example, in the application of Subtitle 17, "Stock and Mutual Insurers"; the rulemaking authority of the Insurance Commissioner (§26); the power of the Insurance Commissioner to subpoena witnesses (§27); and the power of the Insurance Commissioner to enforce those provisions of the Unfair Trade Practices Act (Subtitle 15) not specifically preempted by Subtitle 42. See Lumbermen's Mutual Casualty Co. v. Insurance Commissioner, 302 Md. 248 (1985).

We find further support for this construction in Subtitle 42 itself. Were dental plans not subject to the remainder of Article 48A, the applicability of the Insurance Commissioner's rulemaking authority would be in doubt.6 Yet Subtitle 42 clearly indicates that the General Assembly contemplated instances in which the Commissioner may choose to adopt regulations. For example, §593(a) states, in part:

"The Commissioner may suspend or revoke any certificate of authority issued to a dental plan organization under this subtitle if the Commissioner finds that any of the following conditions exists:

(7) The dental plan organization has failed to comply with this subtitle or any rules and regulations promulgated pursuant to it."

But Subtitle 42 itself contains no grant of rulemaking authority. Had the General Assembly intended Subtitle 42 dental plans to be exempt from Article 48A, and therefore beyond the Commissioner's rulemaking authority, it would not reference the Commissioner's use of that very authority in §593(a)(7).

To interpret Subtitle 42 otherwise would thwart the stated legislative intent of "providing for the regulation of prepaid dental plans," for the Insurance Commissioner would, for example, be unable to penalize fraudulently filed financial statements (§221), illegally collected premiums (§230), or refusals to pay dental providers under the plan (§230A). The General Assembly intended to carve certain exceptions for dental plans out of the formidable mass of regulations applicable to all insurers, in order to preserve plans that could service small communities. In our view, it did not intend to truncate the Insurance Commissioner's ability to fully regulate all plans in order to protect the public interest.

IV
Conclusion

In summary, it is our opinion that dental plans licensed pursuant to Subtitle 42 of Article 48A are generally subject to requirements codified elsewhere in the Insurance Code, except to the extent that a provision in Subtitle 42 is more specific than a requirement on the same subject elsewhere in the Insurance Code.

J. Joseph Curran, Jr., Attorney General
Frank C. Bonaventure, Assistant Attorney General
Randi F. Reichel, Assistant Attorney General

Jack Schwartz
Chief Counsel
Opinions and Advice

1 Prior to the enactment of Subtitle 42, dental plans, for the most part, were entirely unregulated. Indeed, few dental plans had been regulated anywhere in the country at that time.

2 "Dental services" encompass "any service included in the practice of dentistry. . . ." Article 48A, §581(d). See §4-101(e) of the Health Occupations Article.

3 The legislative history also reveals that the General Assembly sought to achieve regulation that would apply equally to both large, structured, corporate dental plans and to plans operating on a small, individualized basis. According to a staff document in the legislative file, an amendment to House Bill 281 that would have imposed a flat $75,000 surplus requirement upon all dental plan organizations, without exception, was rejected "because it would prohibit small dental plans from functioning within the marketplace, would reduce competition, and would thus hurt the consumers. Most of the dental plans that would be adversely affected by this amendment would be small plans formed by individual practitioners who offer their services to individual enrollees within a community." Instead of this specially burdensome requirement, the General Assembly provided for a different exemption procedure. See §586(c). In general, small plans are able to compete equally within the regulatory framework to which all plans are subject.

4 Article 48A, §3 provides: "'Insurer' includes every person engaged as indemnitor, surety, or contractor in the business of entering into contracts of insurance."

5 Subtitle 42 provides for application for certificates of authority (§583); approval by the Commissioner for the issuance of certificates of authority (§585); surplus requirements (§586); investigations by the Insurance Commissioner (§588); annual reporting requirements (§590); grounds for suspension or revocation of certificates of authority (§593); and the Commissioner's authority to issue cease and desist orders and injunctions (§§594, 595).

6 Section 26 states, in pertinent part: "The Commissioner may make reasonable rules and regulations necessary for or as an aid to effectuation of any provision of this article." See Insurance Commissioner v. Blue Shield of Maryland, 295 Md. 496 (1983).