FEC Issues Advisory Opinion to Independence Blue Cross Political Action Committee – Insurance News

WASHINGTON, May 1 — The Federal Election Commission issued the following Advisory Opinion (No. AO-2024-04):

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To: Charles M. Ricciardelli, Esq., Samuel Rothbloom, Esq., Skadden, Arps, Slate, Meagher & Flom LLP, 1440 New York Avenue, N.W., Washington, D.C. 20005-2111

Dear Messrs. Ricciardelli and Rothbloom:

We are responding to your advisory opinion request on behalf of Independence Blue Cross LLC Political Action Committee (“IBC PAC”), the separate segregated fund (“SSF”) of AmeriHealth, Inc., a subsidiary of Independence Health Group, Inc. (“IHG”), concerning the application of the Federal Election Campaign Act, 52 U.S.C. Sec.Sec. 30101-45 (the “Act”), and Commission regulations to the affiliation status of IBC PAC and the Blue Cross Blue Shield Association (“BCBSA”), and its SSF, the Blue Cross Blue Shield Association Political Action Committee (“BluePAC”).

The Commission concludes that IHG and BCBSA, and their respective SSFs, are no longer affiliated.

Background

The facts presented in this advisory opinion are based on your letter received on March 1, 2024.

IHG is a member and independent licensee of BCBSA and holds a primary license to use the Blue Cross name and marks./1 IHG wholly owns AmeriHealth, Inc., which serves as the connected organization for IBC PAC./2 AmeriHealth, Inc. also wholly owns Independence Blue Cross, LLC (“IBC”), which holds a controlled affiliate license to use the Blue Cross name and marks./3 Historically, IHG and BCBSA have treated IBC PAC and BluePAC as affiliated under the Act because IHG is a BCBSA member and owns a 100% interest in AmeriHealth, Inc. and IBC./4

IHG is a Pennsylvania nonprofit corporation, which, along with some of its subsidiaries,/5 hold licensing agreements with BCBSA (the “Agreements”)./6 These Agreements provide IHG with the exclusive rights to market and sell products utilizing the Blue Cross name and marks in its designated service area: Bucks, Montgomery, Philadelphia, Chester, and Delaware counties, which, together, comprise the southeastern tip of Pennsylvania./7 IHG does not market and sell products under the Blue Cross name and marks outside of this designated service area./8

IHG does not exclusively operate BCBSA business (“Blue business”)./9 It engages in “well diversified” “non-Blue” business, which “offer[s] a wide range of healthcare products and services” that includes, but is not limited to, the provision of health insurance./10 For instance, IHG has numerous non-health insurance subsidiaries, including AmeriHealth Administrators, Inc., a wholly owned subsidiary of IHG that provides third-party administration and related services, and Tandigm Health LLC, a majority-owned subsidiary of IHG that provides population-health services to physicians and healthcare systems./11 IHG’s non-Blue business also extends outside of southeastern Pennsylvania, into nearly all fifty states, the District of Columbia, and tribal territory./12

By letter from BCBSA’s President and CEO, “BCBSA takes no position on the facts and law contained” in IBC PAC’s request that the Commission consider IHG and BCBSA, and their respective SSFs, as disaffiliated and “remains neutral as to the merits of this request.”/13

Question Presented

Are IHG and BCBSA, and their respective SSFs, no longer affiliated for purposes of the Act and Commission regulations?

Legal Analysis

Yes, IHG and BCBSA, and their respective SSFs, are no longer affiliated under the Act and Commission regulations.

Political committees, including SSFs, are “affiliated” if they are established, financed, maintained, or controlled by the same corporation, labor organization, person, or group of persons, including any parent, subsidiary, branch, division, department, or local unit thereof./14 For purposes of the Act’s contribution limits, contributions made to or by affiliated political committees are considered to have been made to or by a single political committee./15

Commission regulations identify certain committees that are per se affiliated, such as those established, financed, maintained, or controlled by a single corporation and its subsidiaries./16 The Commission has previously found that a parent-subsidiary relationship, and thus per se affiliation, is created when a parent company owns a majority interest in another organization./17 None of these criteria are met here, and so IHG and BSBSA are not per se affiliated.

In the absence of per se affiliation, the Commission examines “the relationship between organizations that sponsor committees, between the committees themselves, [and] between one sponsoring organization and a committee established by another organization to determine whether committees are affiliated.”/18 Commission regulations provide a non-exhaustive list of ten “circumstantial factors” to be considered “in the context of the overall relationship” in order to determine whether the respective entities are appropriately considered affiliated./19

In Advisory Opinion 1990-22 (BCBSA), the Commission concluded that BCBSA is affiliated with each of its licensed plans in the United States. Although IHG is a BCBSA licensee, the request asserts that, in the intervening three decades, “the business relationship between the organizations has evolved to the point where IHG no longer believes that affiliation is necessary under FECA.”/20 The Commission considers the ten circumstantial factors in turn.

(A) Controlling Interest

This factor considers whether a sponsoring organization owns a controlling interest in the voting stock or securities of the other sponsoring organization./21 Because IHG and BCBSA neither have shareholders nor maintain any equity ownership in the other, this factor weighs in favor of concluding that these entities are not affiliated./22

(B) Governance

This factor concerns whether a sponsoring organization has the authority or ability to direct or participate in the governance of the other sponsoring organization or its committee through provisions of constitutions, bylaws, contracts, or other rules, or through formal or informal practices or procedures./23

BCBSA maintains no seats on any IHG board and no voting rights in IHG through ownership of securities./24

IHG, like every BCBSA member plan, maintains a position on BCBSA’s board of directors./25 IHG’s President and CEO sits on BCBSA’s 34-member board, which is composed of the CEOs of each of its 33 members plans plus the BCBSA President./26 The IHG board member enjoys the same voting rights and privileges as each other board member and maintains no special positions with respect to the board./27 In addition to generally managing BCBSA affairs, the BCBSA board elects the board chair, board committee members, and the BCBSA president, treasurer, and corporate secretary; grants licenses to member plans to conduct Blue business; amends brand regulations; approves the BCBSA budget; and assesses member dues./28

The IHG member of the BCBSA board currently sits on three standing committees: (1) the finance and audit committee, which he chairs; (2) the market solutions committee; and (3) the organization and governance committee./29 These committees are composed solely of BCBSA board members, each of which has a single vote./30 None of these committees “have the ability to directly impact the governance, policies, or decision-making by IHG or IBC or other Blue Cross or Blue Shield licensees.”/31 That said, the organization and governance committee “can indirectly impact licensees with respect to their Blue-branded business by recommending changes to license agreements and by making determinations of licensee compliance with license agreements.”/32

Additionally, BCBSA bylaws and license agreements permit member plans, like IHG, to make certain governance decisions, such as amending the BCBSA bylaws and amending and terminating licenses, collectively, at member plan meetings./33 Each member plan sends one designee to these meetings, where votes are weighted based on the dues and royalties they pay to BCBSA./34 As of November 2023, IHG casts 3,230 votes out of a total of 102,511 weighted votes, amounting to 3.15% of the vote share./35

Lastly, “the formal relationship between the organizations is limited to that of a licensorlicensee with respect to IHG’s use of the Blue Cross name and marks.”/36 BCBSA enters into license agreements with independent and locally operated companies to operate Blue Cross and Blue Shield plans./37 Still, the Agreements between the parties limit the categories of persons who may populate the majority of IHG’s governing board./38 Even with that contractual limitation, “IHG has discretion over all board appointments and BCBSA has no authority to influence the selections.”/39

Based on the foregoing, IHG and BCBSA each exercise some degree of influence in the governance over the other. But in the context of licensees and franchises, the Commission generally has not found affiliation absent circumstances indicating that “one entity exercises pervasive supervision and direction over the daily operations and business policies of another entity.”/40 Here, IHG’s representation on the BCBSA board is just one of 34 equal-voting-right members, and its weighted voting rights during member plan meetings amount to only 3.15% of the total votes. The Commission previously has found that the governance factor indicates disaffiliation where, like here, one entity controls only a small minority of seats on the other’s board of directors./41 And though the BCBSA licensing agreement with IHG requires it to exclude certain categories of persons from its board, BCBSA plays no role in the actual selection of IHG board members. Therefore, BCBSA does not exercise pervasive supervision and direction over the daily governance of IHG.

(C) Hiring Authority

This factor concerns whether a sponsoring organization has the authority or ability to hire, appoint, demote, or otherwise control the officers or other decision-making employees of the other sponsoring organization./42 Here, “BCBSA does not have the authority to hire, appoint, demote, or otherwise control the officers or other decision-making employees of IHG.”/43 IHG, as a member of the BCBSA board, casts one vote for elective officers./44 Additionally, as a member of the board’s 13-member organization and governance committee, IHG casts one vote to confirm appointive officers selected by the BCBSA president./45 The Commission previously concluded that controlling only a minority interest on the board of directors indicates that the sponsoring organization lacked the authority to take hiring actions on its own, and, thus, this factor weighed against finding affiliation./46 IHG’s additional membership on the organization and governance committee does not alter that weight, given that it casts only 1 of 13 votes to confirm the appointment made by the BCBSA president.

(D) Common Membership

This factor considers whether a sponsoring organization has common or overlapping membership with the other sponsoring organization that indicates a formal or ongoing relationship between the sponsoring organizations./47 IHG and BCBSA have no common members./48 This factor therefore weighs in favor of finding that the entities and their SSFs are not affiliated./49

(E) Common Officers or Employees

This factor considers whether sponsoring organizations have common or overlapping officers or employees, indicating a formal or ongoing relationship between the organizations./50 IHG and BCBSA have no overlapping officers or employees./51 When, as here, two organizations have no common officers or employees, this factor weighs against affiliation./52

(F) Former Officers or Employees

This factor concerns whether a sponsoring organization has any members, officers, or employees who previously were members, officers, or employees of the other sponsoring organization, indicating a formal or ongoing relationship or the creation of a successor entity./53 Here, “none of IHG’s officers and to its knowledge none of its employees are former BCBSA employees.”/54 The Commission previously found in Advisory Opinion 2014-11 (HCSC), that even when one BCBSA licensee had a “limited” number of former BCBSA employees, including one serving in a senior leadership position, that small number of former BCBSA employees did not suggest a “formal or ongoing relationship” within the meaning of section 100.5(g)(4)(ii)(F) and 110.3(a)(3)(ii)(F)./55 Given that IHG has no known employees that formerly worked for BCBSA, this factor also weighs against finding affiliation.

(G) Providing Funds or Goods

Under this factor the Commission considers whether a sponsoring organization provides funds or goods in a significant amount or an ongoing basis to the other sponsoring organization or committee./56 Here, BCBSA provides IHG the exclusive rights to market and sell products under the Blue Cross name and marks in southeastern Pennsylvania./57 Additionally, BCBSA provides administrative services to IHG for the healthcare benefits it offers to federal employees, retirees, and their dependents pursuant to a BCBSA contract with the Office of Personnel Management./58 In exchange for these goods, IHG provides funds to BCBSA in the form of licensing and membership fees and, further, must use the Blue Cross name and marks to generate at least 80% of its local revenue attributable to health care plans and related services offered within southeastern Pennsylvania./59 The Commission previously has examined a similar arrangement between BCBSA and another one of its licensees and concluded that their respective provision of funds and goods weighs in favor of finding the entities to be affiliated;/60 the same conclusion applies here.

(H) Arranging for the Provision of Funds or Goods

This next factor concerns whether a sponsoring organization causes or arranges for funds or goods to be provided to the other sponsoring organization in a significant amount or on an ongoing basis./61 BCBSA offers IHG (and other membership plans) voluntary contractual agreements with some vendors, such as AT&T, Xerox, and Hertz./62 IHG describes these services as “insubstantial.”/63 The Commission previously concluded that BCBSA’s provision of similar voluntary and “insubstantial” contractual arrangements — in that case, with nationwide airlines and telecommunications companies — do not weigh in favor of finding the entities’ SSFs to be affiliated./64 That conclusion applies equally here.

(I) Formation

This factor involves whether a sponsoring organization or committee or its agent had an active or significant role in the formation of the other sponsoring organization./65 BCBSA did not create IHG./66 In fact, IHG’s predecessor, IBC, was formed in 1938 — 44 years before BCBSA was formed in 1982./67 Likewise, IHG played no role in forming BCBSA./68 These facts weigh against finding that IHG and BCBSA, and their respective SSFs, are affiliated./69

(J) Contribution Patterns

This factor pertains to whether the sponsoring organizations’ SSFs have similar patterns of contributions or contributors that would indicate a formal or ongoing relationship between the sponsoring organizations or committees./70 Since 2019, the number of federal committees that received contributions from both IBC PAC and BluePAC has declined./71 Between January 1, 2019, and December 31, 2020, IBC PAC and BluePAC collectively contributed to 247 federal committees but only 31, or 12%, received contributions from both./72 Then, from January 1, 2021 through December 31, 2022, IBC PAC and BluePAC contributed to a total of 221 federal committees but only 23, or 10.4%, received contributions from both./73 And most recently, between January 1, 2023, and December 31, 2023, IBC PAC and BluePAC contributed to a total of 197 federal committees but only 15, or 7.6%, received contributions from both./74 IHG asserts that “the overlap is most likely the result of both corporations’ interest in insurance and health care issues and does not indicate a formal or ongoing relationship between the committees.”/75 The Commission agrees that the decreasing, small percentage of overlapping contributions does not suggest a formal or ongoing relationship between IHG and BCBSA, and, thus, this factor weighs against finding affiliation.

Context of the Overall Relationship between the Entities

In considering the foregoing circumstantial factors, the Commission examines the “context of the overall relationship” between the entities to determine whether they are properly considered affiliated./76 In the context of BCBSA licensees, the Commission previously has observed that relationship features signaling disaffiliation include when the licensee is not required to conduct its insurance and related businesses exclusively under the BCBSA mark, when the licensee has become well-diversified beyond the health insurance products it markets under the licensing agreements with BCBSA, and when the licensee’s non-Blue business competes with BCBSA./77

Here, IHG’s businesses are “well diversified, offering a wide range of healthcare products and services.”/78 “Its subsidiaries include, but are not limited to, licensed health insurance companies, health maintenance organizations, and third-party administrators, which offer and/or administer a variety of health benefit plans and services.”/79 For instance, its largest subsidiary, AmeriHealth Caritas, offers managed Medicaid plans, special needs programs, longterm care services and support, and consumer exchange plans./80 IHG also owns non-health insurance subsidiaries./81 For example, its wholly owned subsidiary, AmeriHealth Administrators, Inc., provides third-party administration and related services./82 And its majority-owned subsidiary, Tandigm Health LLC, provides population-health services to physicians and healthcare systems./83

Additionally, IHG’s non-Blue business is geographically diverse, extending far beyond the five counties in southeastern Pennsylvania where it conducts its Blue business, into nearly all 50 states, the District of Columbia, and tribal territory./84

Moreover, IHG has non-Blue business that competes against Blue business./85 In particular, AmeriHealth Caritas and its subsidiaries compete against Blue plans in seven of the nine states in which they operate and the District of Columbia./86 Additionally, two IHG subsidiaries that provide health insurance products in New Jersey (the AmeriHealth Insurance Company of New Jersey and AmeriHealth HMO, Inc.) compete against a Blue plan in the individual Affordable Care Act market and in the employer group market./87

Further, in 2022, IHG’s non-Blue business generated $13.1 billion in revenue, amounting to 48% of its total revenue./88 That same year IHG had 5.6 million non-Blue members, accounting for 67% of its total membership./89 Still, “IHG’s Blue business remains an important part of its business model.”/90 Indeed, a majority of IHG’s revenue (52%) still comes from its use of the BCBSA name and marks./91 Nevertheless, the Commission previously has determined that negotiated business arrangements between two entities do not by themselves necessarily rise to the level of affiliation./92 The Commission made this observation, for example, in Advisory Opinion 2014-11 (HCSC), in which the SSF of a BCBSA licensee, Health Care Service Corporation (“HCSC”) asked the Commission to find that it was no longer affiliated with BCBSA’s SSF./93 The Commission made that finding even though HCSC’s “overall operations remain[ed] heavily tied to its use of the BCBSA marks for the sale of health insurance products,” because its “ongoing relationship with and obligations to BCBSA under the Agreements [we]re outweighed by the absence of facts that support a finding of affiliation” under all but one of the enumerated factors (factor (G): providing funds or goods)./94 Likewise, although IHG’s overall business is still strongly tied to its Blue business, just one of the enumerated factors — also factor (G) — supports that IHG and BCBSA, and their respective SSFs, are affiliated.

Therefore, on balance, after considering the circumstantial factors in the context of the overall relationship between the entities involved, the Commission concludes that IHG and BCBSA, and their respective SSFs, are no longer affiliated.

This response constitutes an advisory opinion concerning the application of the Act and Commission regulations to the specific transaction or activity set forth in your request./95 The Commission emphasizes that, if there is a change in any of the facts or assumptions presented, and such facts or assumptions are material to a conclusion presented in this advisory opinion, then the requestor may not rely on that conclusion as support for its proposed activity. Any person involved in any specific transaction or activity which is indistinguishable in all its material aspects from the transaction or activity with respect to which this advisory opinion is rendered may rely on this advisory opinion./96 Please note that the analysis or conclusions in this advisory opinion may be affected by subsequent developments in the law including, but not limited to, statutes, regulations, advisory opinions, and case law. Any advisory opinions cited herein are available on the Commission’s website.

On behalf of the Commission,

Sean J. Cooksey, Chairman

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Original text plus footnotes here: https://www.fec.gov/files/legal/aos/2024-04/2024-04.pdf