United States District Court, N.D. Texas, Dallas Division
FCE BENEFIT ADMINISTRATORS, INC.
INDEPENDENCE HOLDING COMPANY, et al.
MEMORANDUM OPINION AND ORDER
GREN SCHOLER UNITED STATES DISTRICT JUDGE
Order addresses Defendants Independence Holding Company
("IHC"), Madison National Life Insurance Company,
Inc. ("MNL"), Standard Security Life Insurance
Company of New York ("SSL"), and IHC Carrier
Solutions, Inc.'s ("IHC Carrier")
(collectively, "Defendants") Motion to Dismiss
Plaintiffs First Amended Complaint ("FAC") [ECF No.
42]. For the following reasons, the Court grants in part and
denies in part the Motion.
February 2011, Plaintiff FCE Benefit Administrators, Inc.
("Plaintiff) entered into an agreement with SSL and MNL,
under which Plaintiff offered SSL's and MNL's
insurance benefits programs to its clients. FAC ¶ 9. In
November 2014, Defendants approached Plaintiff, and requested
that Plaintiff enter into revised contracts with SSL and MNL.
Id. ¶ 10. Plaintiff claims it agreed to the
changes, largely due to Defendants' assurances of a
continuing business relationship. See Id.
¶¶ 10, 13-14. Accordingly, Plaintiff entered into
contracts with MNL ("MNL Agreement") and SSL
("SSL Agreement") (collectively,
"Agreements") on December 18, 2014, and March 3,
2015, respectively. Id. ¶¶ 15, 19. Those
Agreements are substantively the same, and were executed for
the stated purpose of growing the policies of the insurance
produced, managed, and administered by Plaintiff and
underwritten by MNL and SSL. Id. ¶¶ 15,
20. In exchange, Defendants would compensate Plaintiff
"[f]or the Contract Years" 2012 to 2016 at
"forty percent (40%) of all Net Profit. .. earned on the
limited medical, major medical and dental business within the
FCE Business." Id. Ex. A at 2; id. Ex.
B at 2. "Net Profit" is calculated as follows:
c. The Net Profit or Net Loss of each Contract Year shall be
calculated in accordance with the following formula, it being
understood that INCOME shall be the amount identified in
subparagraph 1. below, and OUTGO shall be the sum of the
amounts identified in subparagraphs 2., 3., 4., 5., and 6.
1. Gross earned Premium received by [MNL and SSL] for losses
occurring during the Contract Year under consideration,
reduced by the rebates paid as determined by [MNL's and
SSL's] actuaries, in accordance with the regulations
promulgated under the Patient Protection and Affordable Care
Act (and related amendments and regulations)
2. Losses incurred and paid plus reserves for losses incurred
and not yet paid as established by [MNL and SSL] for losses
occurring during the Contract Year under consideration
3. An additional 20% reserve margin will apply to the best
estimate reserves in all calculations ("Outgo 3");
4. Carrier fees, commissions, excess reinsurance fees (see
Exhibit C), risk adjusters, administration expenses,
actuarial fees, PPACA taxes, fees and expenses, medical loss
ratio rebates under PPACA calculation in accordance with
Paragraph 5 and related expenses payable by MNL for the
Business, as defined by MNL and used in pricing for the
Business ("Outgo 4");
5. Federal and state: premium taxes, licenses, fees and
assessments during the Contract Year ("Outgo 5").
The amount by which INCOME exceeds OUTGO is the Net Profit.
The amount by which OUTGO exceeds INCOME is the Net Loss.
Id. Ex. A at 2; id. Ex. B at 2. On December
18, 2014, Plaintiff entered into a separate contract with MNL
and SSL-the Amended and Restated Administrative Services
Agreement ("ASA"). Defs. App. 84. The ASA contains
the following arbitration provision:
18. ARBITRATION (a) In the event of any
dispute between the parties which arises under [the ASA], . .
shall be settled by arbitration in accordance with the rules
for commercial arbitration of the American Arbitration
Association (or a similar organization) in effect at the time