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be at least 18 years of age. Individual enrollees were required
to complete a medical questionnaire, whereas group enrollees were
not subject to this requirement. All enrollees generally paid
the same premium based on a community rating system. During the
period in question, Geisinger HMO had approximately 71,000
individual and group enrollees.
Geisinger HMO also enrolled slightly more than 1,000
Medicare recipients under a “wraparound” plan that covered
medical expenses not reimbursed by Medicare. Geisinger HMO also
enrolled a small number of Medicaid recipients. Geisinger HMO
planned to initiate a subsidized dues program to assist enrollees
who might be unable to continue to pay their membership fees as
the result of some financial misfortune.
At the conclusion of the administrative proceedings, the
Commissioner determined that Geisinger HMO did not qualify for
exemption as an organization described in section 501(c)(3) on
the grounds that: (1) Geisinger HMO did not satisfy the criteria
for exemption outlined in Sound Health Association v.
Commissioner, supra; and (2) Geisinger HMO was not an integral
part of its tax-exempt parent.
In Geisinger I, we held that the Commissioner erred in
determining that Geisinger HMO did not qualify for exemption
pursuant to section 501(c)(3). We based our holding largely on a
comparison of the Geisinger HMO with the organization in Sound
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