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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 9, 1997
OXFORD HEALTH PLANS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19442 06-1118515
(State or other jurisdiction) (Commission (IRS Employer
of incorporation) File Number) Identification No.)
800 Connecticut Avenue, Norwalk, Connecticut 06854
(Address of principal executive offices) (Zip Code)
(203) 852-1442
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
As a result of its examination of the Company's New York HMO and
insurance subsidiaries, the New York State Insurance Department
("Department") has filed a Market Conduct Report on Examination, as of
December 22, 1997, for the period from January 1, 1995 through November 1,
1997. In order to resolve matters raised in the Department's examination and
report, the Department and the Company's New York subsidiaries have entered
into a Stipulation dated December 22, 1997 ("Stipulation"), and the
subsidiaries have paid a penalty of $3 million in lieu of any other
disciplinary action that the Department or New York State might take in
consequence of any violation or conduct up to November 1, 1997.
The Stipulation states that the penalty "takes account of Oxford's
ongoing efforts to resolve its claims payment problems and Oxford's commitment
to comply with the New York Insurance Law as well as all Department rules and
regulations." The New York subsidiaries have agreed to take the corrective
actions specified in the Department's report to refund or credit to their
subscribers all premium amounts that were collected without providing the
requisite notice (estimated to be less than $260,000); to send, within 90 days,
refunds (estimated to be less than $250,000) together with 9% interest to
certain subscribers in order to bring the co-insurance paid by such subscribers
to the contractually specified percentage; and to retain for the next three
years the services of an independent auditing firm for the purpose of
conducting three annual compliance audits and advising their Board of
Directors, in writing, whether the subsidiaries have fully complied during the
audit period with all of the recommendations contained in the Department's
report. The subsidiaries also agreed that they will not include the amount of
the penalty imposed under the Stipulation as an expense in any future rate
application or filing made with the Department. The Stipulation provides that
the Department intends to conduct a follow-up examination in a reasonable time
to determine the status of the corrective actions described in its report.
The Department has directed the New York subsidiaries to obtain notes
or other written evidence of agreements to repay from each provider who has
received an advance. As a result of the process of obtaining such notes or
other written agreements and continuing to reconcile delayed claims and pay
down backlogged claims, the Company may determine to create reserves for
advances which may not be collectable.
On December 12 and 24, 1997, complaints in purported derivative actions
brought by two shareholders were filed on behalf of the Company in Connecticut
Superior Court against the Company's directors and certain of its officers.
These derivative complaints generally allege that the defendants breached their
fiduciary obligations to the Company, mismanaged the Company and wasted its
assets in planning and implementing certain changes to the Company's computer
system, by making misrepresentations concerning the status of those changes in
the Company's computer system, by failing to design and to implement adequate
financial controls and information systems for the Company, and by making
misrepresentations concerning the Company's membership enrollment, revenues,
profits and medical cost in the Company's financial statements and other public
representations. The complaints further allege that certain of the defendants
breached their fiduciary obligations to the Company by disposing of Company
Common Stock while the price of the Common Stock was artificially inflated by
their alleged misstatements and omissions. The complaints seek unspecified
damages, attorneys' and experts' fees and costs and such other relief as the
court deems proper. Neither plaintiff has made a demand on the Company's Board
of Directors that the Company pursue the causes of action alleged in the
complaint. Each complaint alleges that plaintiffs duty to make such a demand
was excused by the directors' alleged conflict of interest with respect to the
matters alleged therein. Although the outcome of these actions cannot be
predicted at this time, the Company and the defendants believe that the
defendants have substantial defenses to the claims asserted in the complaints.
Additional complaints containing similar allegations may be filed.
On December 9, 1997, the Company received an informal request from the
Securities and Exchange Commission's Northeast Regional Office seeking
production of certain documents and information concerning a number of subjects,
including disclosures made in the Company's October 27, 1997 press release
announcing a loss in the third quarter. The Company intends to cooperate fully
with this inquiry, the result of which cannot be predicted at this time.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OXFORD HEALTH PLANS, INC.
Date: December 26, 1997 By: /s/ BRENDAN R. SHANAHAN
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BRENDAN R. SHANAHAN
Vice President and Controller
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