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Continental's expenses and an element of profit. The reinsurance
contracts covering workers' compensation risks required Parthenon
to post a letter of credit to secure its reinsurance obligations.
When the New York Insurance Department placed Ideal Mutual
in liquidation during 1984, the receiver placed a freeze on the
payment of any claims for workers' compensation against
petitioners' hospitals made under policies with Ideal. At that
time, HCA operated 26 hospitals in the State of Florida that were
subject to a Florida law which would tie up the bank accounts of
those hospitals unless the claims of nurses and others on
disability under the workers' compensation law were paid. In
order to prevent the tie-up of those bank accounts, HCA, or the
applicable subsidiaries, paid those workers' compensation claims.
Through 1986, HCA paid premiums to Ideal Mutual or
Continental for workers' compensation insurance and charged the
applicable hospitals on the same basis that total premiums were
set by the insurer; i.e., by the application of statutorily-set
rates per dollar of payroll. Commencing policy year 1987, the
underlying workers' compensation policies were rated
retrospectively; i.e., premiums were adjusted after the policy
year to reflect the actual losses from that year, subject to
minimum and maximum premium limits.
In addition to workers' compensation reinsurance, Parthenon
during the years in question also assumed other reinsurance from
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