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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): July 31, 1997
OXFORD HEALTH PLANS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-19442 06-1118515
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(State or other jurisdiction) (Commission (IRS Employer
of incorporation) File Number) Identification No.)
800 Connecticut Avenue, Norwalk, Connecticut 06854
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(Address of principal executive offices) (Zip Code)
(203) 852-1442
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(Registrant's telephone number, including area code)
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Item 5. Other Events.
Claims Payment Delays
As previously reported, unanticipated software and hardware issues
arising from the recent upgrade of the Company's computer operating system
created delays in the Company's payment of claims to providers in late 1996 and
early 1997. The Attorney General of the State of New York (the "Attorney
General") had expressed concern over the impact of delays in claims payment on
providers and members. See Item 5 of the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997. The Company entered into an Assurance of
Discontinuance, effective July 25, 1997 (the "Agreement"), with the Attorney
General under which it agreed to pay interest at 9% per annum on provider clean
claims not paid by Oxford within 30 days on its New York commercial and Medicaid
lines of business. Interest will be paid for the period commencing on the later
of April 1, 1997 or the 31st day after Oxford's receipt of the clean claim. The
agreement is effective for all claims paid on or after July 25, 1997 and
terminates on January 1, 2000. The Agreement requires that the Company pay at
least $1,000,000 in interest to providers and $150,000 to the State of New York
for the costs of its investigation.
The interest payment provisions of the Agreement will be superseded
upon the effectiveness of "prompt payment" legislation passed by the New York
State Assembly and Senate which will require all HMOs and insurers to pay
interest at 12% per annum on claims not paid within 45 days. While the Company
expects the Governor to approve such legislation, there can be no assurance as
to the outcome of the legislative process.
The Company has addressed the problems principally responsible for the
delays in claims payments and is paying the vast majority of claims currently
received on a timely basis. Moreover, the Company is rapidly working down
remaining backlogged claims and has advanced over $271 million against
outstanding claims, for which interest will not be payable. The Company believes
that the Agreement is in the best interests of the Company and its members and
providers and has implemented a similar policy to pay interest in New Jersey and
Connecticut at rates and after grace periods consistent with respective state
regulations. The Company believes that the Agreement and its new interest policy
will not have a material adverse effect on its financial condition or results of
operations.
The New York State Department of Insurance ("DOI") is currently
conducting its routine triennial examination and market conduct examination of
the Company's New York HMO and insurance subsidiaries. In the course of these
examinations, the DOI has investigated claims payment delays by the Company. The
DOI has also expressed concern over delays in payment of claims by health plans
in general and is investigating health plans state-wide. The Company is
cooperating fully with the DOI in its examinations and expects that the DOI will
issue a report on examination addressing claims payment and other regulatory
issues. The DOI has not issued any report or findings but may seek to impose a
fine or other penalty in connection with alleged regulatory violations. There
are no specific guidelines for determining the fines or penalties imposed in
such cases. While the Company is unable to estimate the amount of any potential
fine or penalty, based on prior proceedings of this nature before the DOI, the
Company does not believe that the results of the examination will have a
material adverse effect on the Company's financial condition or results of
operations.
This report includes forward-looking statements as defined in
the Securities Exchange Act of 1934, as amended, including statements
concerning the impact on the Company of the Agreement, the DOI examination
and the effect of government regulation. Actual results could differ
materially from those discussed. Factors that could cause actual results to
differ materially include governmental action and the Company's ability to
continue to develop processes and systems to support its growing operations.
Additional information concerning factors that could cause actual results
to differ materially from those in forward-looking statements is
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996. Copies are available upon request by calling Oxford at
1-800-889-7546 ext. 1616.
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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: July 31, 1997 By: /s/ ANDREW B. CASSIDY
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Andrew B. Cassidy
Chief Financial Officer
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