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The Department of Insurance permitted Parthenon to report
its results in management report format. For all years except
1982 and 1983, Parthenon and/or PCIC submitted to the Department
of Insurance annual statements in a form prescribed by the
National Association of Insurance Commissioners. The Department
of Insurance conducted examinations of the financial condition,
affairs, and management of Parthenon during 1979, 1984, and 1989.
Each examination report concluded that Parthenon had conducted
its operations in conformity with the requirements of the
Tennessee captive insurance statute. The examination report for
the period ending December 31, 1979, noted that Parthenon's
current policy forms and rates were filed and approved by the
Department of Insurance. From time to time Parthenon consulted
with and secured the approval of the Department of Insurance for
changes or developments in the conduct of its business, including
corporate restructuring to accommodate marketing to individual
physicians, additional premium collection to fund reserve
deficiencies, and discounting of professional liability reserves
for the time-value of money.
Auditing by Medicare Intermediary
During each of the years in issue, Parthenon was audited by
Blue Cross/Blue Shield of Tennessee (Blue Cross), as an
intermediary acting on behalf of HFCA (or its predecessor
agencies) for the purpose of determining whether premiums paid by
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