Case Information
*1 OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
GERALD C. MANN ATTORNEY GENERAL
Honorable O. P. Leckhart, Chairman Board of Insurance Commissioners Austin, Texas
Dear Sir:
Opinion No. 0-4718
We should the South Plains Co-operative Hospital Association of Amherst, Texas, some under the supervision of the Board of Insurance Commissioners under Article 2660a and related questions.
Your letter requested an opinion of this department regarding the above stated question reads as follows:
"The South Plains Cooperative Hospital Association of Amherst, Texas, was shattered by the Secretary of State on May 10, 1940, with the following purpose clause:
"ARTICLE II The purpose for which it is formed is: (a) To buy, leave, or build any hospital and/or clinic, and maintain such medical, surgical and dental staff as the members may do so necessary for the mission and modern treatment of its said members and others; (b) For the members of said corporation to provide for their hospital and medical care, if needed, and each member of said corporation, or any member of his family, or any other person, if in need of medical care, shall choose his or her own physician from any member of the staff, and the said corporation shall not attempt to control the relation existing between any member of said corporation, or any other person, and his or her physician;
*2 Honorable O. H. Leokhart, Chairman, Page 2 (a) To employ only physicians on the staff who will not solicit nor employ, pay or promise to pay any person, firm or corporation to a secure, solicit or drum patients or patronage, and discharge any member from the staff if any person has accepted or agreed to accept pay or employment for such securing soliciting or drumming for patients for said physleian. "ARTICLE VI of the charter provides in part as follows: "The Gouth Jleins Cooperative hospital Association shall not have any sapital stock and shall not be operated for profit, but all of its operations shall be for the mutual benefits of its members. "The Constitution and Hy-laws of the association vest son:rol in a board of Directors with power to acquire necessary property and equipment (artiole III, 500. 1), employ the necessary staff (article III, 500. 2), to admit or reject members (article III, 500. 4), determine the fees charged and the services rendered (article III, 500. 6 &; 7). A membership fee of is required of each applicant in addition to the annual dues required before a member is entitled to any services (article IX, 500. b), and a membership certificate is issued on payment of the membership fee (article IX, 500. 0), said membership being for life and being subject to cancellation by the board upon refund of the initial cost (article IX, 500. 2) and being transferable during life or at death (article IX, 500. b &; m), and power is vested in the board to limit the number of memberships (article IX, 500. 8). "Accordingly the association built the South Plains Cooperative Hospital and now operates said hospital for the benefit of its members as well as non-members. Members are solicited by an agent who holds a permit from the Securities Division of the office of the
*3 Homorable O. F. Loothart, Chaimen, Page 8
Secretary of State. Members who have paid the membership fee and the required annual dues, which vary from 25.00 for a family with additional costs for other dependents, receive the following services free: all examinations, doctors services, surgical operations, obstetric attention, and laboratory work, including all blood and urinal tests. Reduced charges are made to members for room, board, and general nursing care and operating room expenses. Materials and medicines used by the doctors must be paid for, and a member has the right to secure the services of any doctor on the staff free, or if he desires the services of some other doctor, he may have same at his own expense.
"Your attention is called to the following paragraph copied from the explanations made at the end of the Constitution and By-Laws printed form:
"The free service dues are like premiums for insurance against future sickness, therefore cases requiring a major surgical operation or hospitalization at the time of subseribing for free service for the first time will be taken care of by special arrangement with the hospital management. This also applies to obstetrical cases.
The request first year opinion as to whether or not this association is engaged in the business of writing insurance so that it should come under the supervision of the Insurance Department.
"In this connection you are also advised that the association at this time does not have a permit or certificate of authority of any kind from this department, nor has same been applied for. However, the association has expressed to our examiner its willingness to come under the supervision of this department under Article
*4 Honorable O. P. Lockhart, Chairman, Page 4
4590s if required to do so. If you answer the first question in the affirmative, then we submit this second question for your opinion.
"Could the association as presently constituted and operating some under the supervision of this department under Article 4590s in view of Sections 1 and 5 thereof?
"For your consideration with reference to both of these questions we are enclosing herewith our file on the matter, which includes
"(1) Copy of Charter No. 77099 of the association "(2) Copy of Constitution and By-Laws of the association "(3) Copy of Membership Certificate "(4) Literature of the association "(5) Correspondence
"If it is your opinion that the association is enraged in the business of writing insurance and that it could some under the supervision of this department under Article 4590s, we ask that you please return this file to us, and we shall so advise the association and give it an opportunity to comply with said article."
In answer to your first question it is our opinion that said association is writing insurance. See opinion No. 0-4092, a copy of which is enclosed herewith. However as presently constituted and organized this association can not legally come under the supervision of the Board of Insurance Commissioners. See opinion No. 0-4480, a copy of which is enclosed herewith.
We answer your second question in the negative. See opinion No. 0-4480.
The charter of the corporation under consideration here was evidently issued under a misinterpretation of Article 4590s, V.A.C.S., which article does not authorize the granting of a charter for the creation and maintenance of a hospital but only authorize the issuance of a charter "for the purpose of establishing, maintaining and operating a non-profit
*5
Honorable O. P. Lochhart, Chairman, Page 5
hospital service plan." Beetion 6 of article 1302, V.A.C.B., 18 the proper section under which geniteriuna may be ineorporated. Beetion 2 of Artiele 1302, V.A.C.S., permit the oration of hospitals for benevolent and charitable purposes, however the association under consideration here would not be a charitable or benevolent one. The purpose olause of the orporation under consideration here diseloses that it was not inoorporated under either beetion 6 or beetion 2.
We are retaining this file for further investigation and further developments in the matter.
Very truly yours
ATTORNEY GENERAL
Wa. I. Penning Assistant
WJY:AMM
ENCLOSURES