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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
Health Association v. Commissioner, supra. In particular, we
found that, like Sound Health Association, Geisinger HMO was
operated for the charitable purpose of promoting health insofar
as its class of possible enrollees was practically unlimited, it
had adopted a subsidized dues program for its enrollees, it
offered health care services to Medicare recipients at a reduced
rate, and it was not operated for the private benefit of its
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