-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LCWLGzG87Tddw/8u0vrkAywHYPJurYqrb0rx8E/oBWYsIV2Vq0Xpz9bd//YaMd7X /3X7ckn3tLxBca/ZA5MfCw== 0000878897-02-000033.txt : 20020731 0000878897-02-000033.hdr.sgml : 20020731 20020731143346 ACCESSION NUMBER: 0000878897-02-000033 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020724 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020731 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN MEDICAL SECURITY GROUP INC CENTRAL INDEX KEY: 0000878897 STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324] IRS NUMBER: 391431799 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13154 FILM NUMBER: 02715925 BUSINESS ADDRESS: STREET 1: 3100 AMS BLVD CITY: GREEN BAY STATE: WI ZIP: 54313 BUSINESS PHONE: 9206611111 MAIL ADDRESS: STREET 1: 3100 AMS BLVD CITY: GREEN BAY STATE: WI ZIP: 54313 FORMER COMPANY: FORMER CONFORMED NAME: UNITED WISCONSIN SERVICES INC /WI DATE OF NAME CHANGE: 19930328 8-K 1 final8k.txt AMERICAN MEDICAL SECURITY GROUP, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 24, 2002 AMERICAN MEDICAL SECURITY GROUP, INC. (Exact name of Registrant as specified in its charter) WISCONSIN 1-13154 (State of Incorporation) (Commission File Number) 39-1431799 (I.R.S. Employer Identification No.) 3100 AMS BOULEVARD, GREEN BAY, WISCONSIN 54313 (Address of principal executive offices) (Zip Code) (920) 661-1111 (Registrant's telephone number, including area code) ------------------ ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE. The following is a report of recent developments in certain previously reported legal proceedings. In May 2001, the Florida Department of Insurance issued an administrative complaint against United Wisconsin Life Insurance Company ("UWLIC"), a wholly owned subsidiary of American Medical Security Group, Inc. (the "Company"), challenging UWLIC's rating and other practices in Florida relating to UWLIC's MedOne(SM) products for individuals and their families. MedOne(SM) products sold by UWLIC in Florida are written pursuant to a group master policy issued to an association domiciled in a state other than Florida. The case was presented to an Administrative Law Judge in a hearing held in January 2002. In a recommended order entered April 25, 2002, the Administrative Law Judge held that the evidence presented by the Florida Department of Insurance did not support a conclusion that UWLIC had violated any provisions of the Florida insurance statutes or regulations and recommended that all counts of the Department's administrative complaint be dismissed. The recommended order was sent to the Commissioner of the Florida Department of Insurance for entry of a final order. On July 24, 2002, the Florida Department of Insurance issued a final order affirming the recommendations from the Administrative Law Judge with respect to six of eight counts. Among other things, the final order affirmed that the policy issued to the association was exempt from most Florida rating requirements. However, the Department reversed the Administrative Law Judge's finding that tier rating does not violate state law applicable to policies issued out of state, and ordered the suspension of UWLIC's license to sell new business in Florida for one year. The Department's order specifically permits UWLIC to continue to renew its existing business in Florida. On July 29, 2002, the First District Court of Appeals for the State of Florida stayed the order of the Department of Insurance. The stay is effective until the Court of Appeals rules on the Company's request to overturn the order. The Company anticipates a reversal of the final order on appeal. In a press release issued by the Company on July 29, 2002, announcing the stayed order, the Company also stated that, beginning November 1, 2002, it will voluntarily implement a block rating system for its MedOne(SM) business in Florida and discontinue its tier rating system in that state. In a separate proceeding involving substantially similar issues, a class action lawsuit was filed against two of the Company's subsidiaries, American Medical Security, Inc. and UWLIC in February 2000 in the Circuit Court for Palm Beach County, Florida, by Evelyn Addison and others alleging that the Company failed to follow Florida law in discontinuing writing certain health insurance policies and offering new policies in 1998, and that the Company wrongfully terminated coverage, improperly notified insureds of conversion rights and charged improper premiums for new coverage. Plaintiffs also alleged that UWLIC's renewal rating methodology violates Florida law. Plaintiffs are seeking damages unspecified in the complaint. A bench trial on the liability issues of the case was held in Circuit Court in March 2002. In a final judgment entered April 24, 2002, the Circuit Court in the class action lawsuit found among other things, that the policy issued by the Company outside Florida was not exempt from any Florida rating laws and ordered that the question of damages be tried before a jury. In light of the conflicting findings of the Administrative Law Judge and the Circuit Court Judge, the Company requested that the Court in the class action lawsuit reconsider its ruling. The request was denied, as was the Company's request for appellate review. The damages portion of the lawsuit is scheduled to be heard before a jury in September 2002. In a press release issued by the Company on July 24, 2002, the Company indicated it does not anticipate that the ruling of the Florida Department of Insurance suspending UWLIC's license to sell new business in Florida will have a material impact on the Company's earnings for 2002 or 2003. The Company believes it is adequately reserved for a reasonable range of outcomes with respect to the class action lawsuit. Based upon consultation with its counsel, the Company believes it should prevail on appeal in both these actions. However, management's evaluation of the likely impact of these actions could change in the future and an unfavorable outcome in the class action lawsuit in excess of reserves could have a material adverse effect on the Company's consolidated financial position, results of operations or cash flow of a future period. Copies of press releases issued by the Company related to the Florida Department of Insurance's regulatory action are attached hereto as Exhibits 99.1 and 99.2 and incorporated herein by reference. 2 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) EXHIBITS See the Exhibit Index following the Signature page of this report, which is incorporated herein by reference. 3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN MEDICAL SECURITY GROUP, INC. Dated: July 31, 2002 /S/ TIMOTHY J. MOORE ------------------------------------- Senior Vice President of Corporate Affairs, Secretary & General Counsel 4 AMERICAN MEDICAL SECURITY GROUP, INC. (THE "REGISTRANT") (COMMISSION FILE NO. 1-13154) EXHIBIT INDEX TO FORM 8-K CURRENT REPORT DATE OF REPORT: JULY 24, 2002 EXHIBIT FILED NUMBER DESCRIPTION HEREWITH 99.1 Press Release dated July 24, 2002, issued by the Registrant X 99.2 Press Release dated July 29, 2002, issued by the Registrant X EX-1 EX-99 3 exhibit99_1.txt AMERICAN MEDICAL SECURITY GROUP, INC. EXHIBIT 99.1 [American Medical Security Group, Inc. Logo] P.O. Box 19032 Green Bay, WI 54307-9032 FOR MORE INFORMATION CONTACT: NEWS RELEASE Cliff Bowers for Immediate Release Vice President Corporate Communications (920)661-2766 AMERICAN MEDICAL SECURITY GROUP TO CHALLENGE ORDER BY FLORIDA DEPARTMENT OF INSURANCE GREEN BAY, Wis. - July 24, 2002 - American Medical Security Group, Inc. (NYSE:AMZ)(AMS) announced that it has received a final order from the Florida Department of Insurance, dated today, stating the Department's intention to suspend the company's license to operate in that state for one year. AMS received the order just prior to the close of markets today. AMS will immediately file a notice of appeal with the First District Court of Appeals for the State of Florida and tomorrow will request an expedited court directive to stay the order. In April 2002, in administrative proceedings on the same matter, an administrative law judge found in favor of AMS on all issues and recommended that all counts of the complaint filed by the Department in May 2000 be dismissed. The May 2000 complaint challenged certain of the company's rating and other practices in Florida. The Florida Insurance Department's final order today affirmed the recommendations from the judge with respect to six of eight counts. However, the Department reversed the judge's finding that tier rating does not violate state law, and on that basis ordered the suspension of the company's license for one year. The Department's order specifically permits the company to continue to renew its existing business in Florida. 1 Ad One Timothy J. Moore, AMS Senior Vice President and General Counsel, stated that the company has excellent grounds for appeal. "We anticipate a complete reversal of this order on appeal," Moore said. "This order represents an abuse of regulatory discretion in which the department overstepped its authority. "We made a number of good faith efforts to communicate with the Department and find common ground for settlement. While our rating procedures are wholly lawful and appropriate, we were prepared to change them to something more acceptable to the regulator. Unfortunately, our efforts were rebuffed," Moore said. "While we disagree with the ruling by the Florida Department of Insurance, our operating performance remains strong and our operating strategy which has resulted in continued earnings growth remains unchanged," said Samuel V. Miller, AMS Chairman, President & Chief Executive Officer. "We do not anticipate that this ruling will have a material impact on our earnings for 2002 or 2003." Miller said the company now must consider all of its options related to its business in Florida. # # # 2 EX-99 4 exhibit99_2.txt AMERICAN MEDICAL SECURITY GROUP, INC. EXHIBIT 99.2 [American Medical Security Group, Inc. Logo] P.O. Box 19032 Green Bay, WI 54307-9032 FOR MORE INFORMATION CONTACT: NEWS RELEASE Cliff Bowers for Immediate Release Vice President Corporate Communications (920)661-2766 AMERICAN MEDICAL SECURITY RECEIVES APPEALS COURT STAY OF FLORIDA DEPARTMENT OF INSURANCE ORDER GREEN BAY, Wis. - July 29, 2002 - American Medical Security Group, Inc. (NYSE:AMZ) (AMS) today announced that the First District Court of Appeals for the State of Florida has stayed the order of the Florida Department of Insurance, issued July 24, 2002, that would have suspended the company's license to operate in that state for one year. The stay is effective until the Court of Appeals rules on the company's request to overturn the order. No date has been set for a hearing on the appeal. AMS agents in Florida can now continue selling the company's health benefit plans for individuals and families. "We remain confident that we will prevail in the appeal process," said Samuel V. Miller, AMS Chairman, President & Chief Executive Officer. AMS also announced that, beginning November 1, 2002, it will voluntarily implement a block rating system for its MedOne business in Florida and discontinue its tier rating system. "This has not been about profits, because tier rating versus block rating is revenue neutral for us," Miller said. "This has been about our belief that tier rating has advantages over block rating for the majority of our insureds. However, it's now very clear that the current environment in Florida is far more conducive to block rating than tier rating. This change will be in the best interest of our business in that state." 1 Ad One American Medical Security Group, through its operating subsidiaries, markets health care benefits and insurance products to small businesses, families and individuals. Insurance products of American Medical Security Group are underwritten by United Wisconsin Life Insurance Company. The company serves customers nationwide through partnerships with professional, independent agents and quality health care providers. It provided medical and dental coverage for 529,103 members as of June 30, 2002. # # # 2 -----END PRIVACY-ENHANCED MESSAGE-----