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The rate making process involved first estimating the total
covered losses that would be experienced by the hospitals and
then making an actuarial determination of premium rates, adjusted
on the basis of geographical differences in loss costs, that
could be multiplied by the number of exposure units (e.g.,
occupied beds, outpatient visits, and emergency room visits) of
each insured hospital to reach a premium sufficient, in the
aggregate, to cover the estimated losses of the entire group.
Each insured hospital would pay only the geographically adjusted
average loss represented by the applicable rate times its units
of loss exposure.
Parthenon's Reincorporation in the State of Tennessee
The Colorado Insurance Commissioner objected to Parthenon's
decision to base its full-time staff and operations in Nashville,
Tennessee. Consequently, during 1978, after the enactment of the
Tennessee captive insurance statute, which statute is
substantially identical to the Colorado captive insurance
statute, HCA decided to reincorporate Parthenon in the State of
Tennessee. Accordingly, Parthenon Insurance Co. of Tennessee was
incorporated under the laws of that State on December 13, 1978,
and on that date applied for a Certificate of Authority to
transact insurance business under the Tennessee captive insurance
statute. On December 18, 1978, Parthenon Insurance Co.
(Colorado) was merged into Parthenon Insurance Co. of Tennessee
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