IHC Health Plans, Inc. - Page 12

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               Care was licensed to operate an HMO in Utah.  In 1985, the             
          Health Care Financing Administration (HCFA) recognized Care as a            
          federally qualified HMO.                                                    
               In 1985, Care filed with respondent an application for                 
          recognition as an organization that is exempt from taxation                 
          pursuant to section 501(c)(3).  In June 1999, respondent denied             
          Care’s application for tax-exempt status.                                   
               2.  IHC Group, Inc.                                                    
               In July 1991, petitioner organized Group as a nonprofit                
          affiliate for the purpose of establishing a federally qualified             
          medical group model HMO.  Petitioner was Group’s sole corporate             

          obtain insurance: (1) for the cost of providing a member with               
          more than $5,000 in basic health services for any one year; (2)             
          for the cost of basic health services provided to a member by a             
          source outside the HMO due to an emergency; and (3) for not more            
          than 90 percent of the amount by which its costs for any fiscal             
          year exceeds 115 percent of its income.  Additionally, the                  
          section states that HMOs may enter into arrangements under which            
          physicians and/or health care institutions assume all or part of            
          the risk on a prospective basis for the provision to enrollees of           
          basic health services.                                                      
               Petitioner organized IHC Care, Inc., and IHC Group, Inc.               
          (discussed below) as federally qualified HMOs to take advantage             
          of marketing opportunities presented under the so-called dual               
          choice mandate codified under 42 U.S.C. sec. 300e-9 (1976), which           
          required certain employers (generally those with more than 25               
          employees) to offer their employees the option of enrolling in a            
          federally qualified HMO.                                                    

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Last modified: May 25, 2011