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Medical Society of New Jersey v. Bakke

March 6, 2006

THE MEDICAL SOCIETY OF NEW JERSEY, PLAINTIFF-APPELLANT,
v.
THE HONORABLE HOLLY C. BAKKE, IN HER OFFICIAL CAPACITY AS COMMISSIONER OF THE STATE OF NEW JERSEY'S DEPARTMENT OF BANKING AND INSURANCE; THE HONORABLE CLIFTON R. LACY, M.D., IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF THE STATE OF NEW JERSEY'S DEPARTMENT OF HEALTH AND SENIOR SERVICES; THE STATE OF NEW JERSEY; AND UNITED HEALTHCARE, INC., DEFENDANTS-RESPONDENTS.



On appeal from Department of Banking and Insurance.

The opinion of the court was delivered by: Skillman, P.J.A.D

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued September 20, 2005

Before Judges Skillman, Payne and Francis.

The Medical Society of New Jersey appeals a final decision of the Commissioner of Banking and Insurance approving the acquisition of a health care insurance provider by another health care insurance provider. The primary issues are whether the Medical Society has standing to challenge the Commissioner's approval, and if it does, whether the Society is entitled to pursue its challenge by a trial de novo in the Law Division.

We conclude the Medical Society has standing to challenge the Commissioner's approval of the acquisition. However, the Society is only entitled to appellate review of the Commissioner's findings of fact and conclusions of law, not a trial de novo in the Law Division. We also conclude that the Commissioner's findings are supported by substantial credible evidence and that those findings warranted approval of the acquisition. Therefore, we affirm the Commissioner's final decision.

Respondent United Healthcare is a Minnesota health care insurance provider that affords coverage through subsidiaries to approximately fifty-two million people nationwide. The target of United's acquisition is Oxford Health Plans, Inc., a Delaware corporation whose subsidiaries provide health coverage to more than 1.5 million people, primarily in Connecticut, New Jersey, Pennsylvania, Delaware, Rhode Island, and New York.

United's plan to acquire control of Oxford was announced in April 2004. This announcement sparked an investigation by the Antitrust Division of the United States Department of Justice into "the proposed merger's potential effects on the sale of health insurance products by insurance plans and on the purchase of health care provider services." Upon completion of its investigation in July 2004, the Justice Department concluded that the combined companies would have a maximum market share of thirty percent and "should not substantially lessen competition in any relevant market." It also concluded that the combined entity would have only limited negotiating leverage with health care providers. Therefore, the Justice Department allowed the acquisition to proceed.

United was also required to obtain approval of the acquisition by insurance company regulators in New York, Connecticut, California, and New Jersey. Consequently, in May 2004, United filed an application with the New Jersey Department of Banking and Insurance for approval of the acquisition. The Department held a hearing regarding the acquisition at which testimony and documentary evidence was presented by United, Oxford, the Department, and appellant Medical Society of New Jersey, an association of New Jersey physicians.

On July 29, 2004, the hearing officer issued a report recommending approval of the acquisition. On that same day, the Commissioner issued an order accepting the hearing officer's recommendation. United's proposed acquisition of Oxford also was approved by the regulatory officials in the three other states requiring such approvals.

After the Commissioner approved the acquisition, the Medical Society filed an action in the Law Division challenging the decision. In bringing its action in the Law Division, the Medical Society relied upon N.J.S.A. 17:27A-12(a), which provides that "[a]ny person aggrieved" by an order of the Commissioner approving the acquisition of an insurance company "may appeal therefrom to the Superior Court[,] . . . [which] shall conduct its review . . . by trial de novo[.]"

United filed a motion to dismiss the action on the ground that the Medical Society is not a "person aggrieved" by the Commissioner's decision within the intent of N.J.S.A. 17:27A-12(a) and therefore lacks standing to challenge that decision. United also argued that the Law Division does not have jurisdiction to review the Commissioner's decision.

The Law Division concluded in a written opinion that the Medical Society's challenge to the Commissioner's approval of the acquisition is within the Appellate Division's exclusive jurisdiction to review any final decision of a state administrative agency. See R. 2:2-3(a)(2). Accordingly, the Law Division transferred the case to this court without ruling on any of the substantive issues presented by United's motion to dismiss.

After the transfer, the Medical Society moved to transfer the case back to the Law Division. United filed a cross-motion to dismiss the appeal. We denied both motions. During the pendency of this ...


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