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) August 29, 1997
RIGHTCHOICE MANAGED CARE, INC.
(Exact name of registrant as specified in its charter)
Missouri 1-13248 43-1674052
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1831 Chestnut Street, St. Louis, Missouri 63103-2275
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 923-4444
Item 5. Other Events
The registrant's press release, dated August 29, 1997,
relating to litigation with the Missouri Consolidated Health
Care Plan (MCHCP) is attached as an exhibit hereto and
incorporated herein by reference.
EXHIBIT INDEX
99 Press release dated August 29, 1997.
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 hereunto
duly authorized.
RightCHOICE Managed Care, Inc.
September 2, 1997 [s] SANDRA VAN TREASE
Sandra Van Trease
Senior Vice President and
Chief Financial Officer
Exhibit 99
RIGHTCHOICE MANAGED CARE, INC. LETTERHEAD
For More Information Contact
Clara Webb Kinner 314/923-6268
Jim Floyd 314/923-4769
RightCHOICE Files Lawsuit in Connection with
Missouri Consolidated Health Care Plan
ST. LOUIS, AUGUST 29, 1997 -- RightCHOICE Managed Care,
Inc. (NYSE:RIT) today announced that it has filed a lawsuit in
connection with its contract with the Missouri Consolidated
Health Care Plan (MCHCP). MCHCP covers medical expenses of
officers, employees and retirees, including eligible spouses
and dependents, of the State of Missouri and certain state
agencies and local entities such as cities, counties and
school districts that are admitted into the plan. The group
currently comprises approximately 26,000 underwritten members
in the company's BlueCHOICE HMO and HealthNet Blue products.
In the lawsuit filed in the Circuit Court of Cole County,
Missouri, RightCHOICE alleges that MCHCP has exceeded its
statutory authority by including various public entities in
the plan without conducting an actuarial or other appropriate
analysis to determine the fiscal impact of their inclusion on
the Plan. RightCHOICE believes that MCHCP has also granted
preferential treatment to other insurers, violated the
Missouri Sunshine Law and Administrative Procedures Act and
refused to bargain in good faith. RightCHOICE alleges that
MCHCP unfairly subjected RightCHOICE to unreasonable risk
without appropriate notice or a fair opportunity to rebid,
resulting in significant actual and projected financial
losses.
Through the lawsuit, RightCHOICE is asking the Court to
compel MCHCP to negotiate rates in good faith, to award
damages for breach of contract and to issue a declaratory
judgment on the validity of MCHCP's regulations and actions.
RightCHOICE also seeks damages for breach of contract in an
amount exceeding $18 million for estimated losses in plan
years 1997 and 1998, plus amounts to be determined for plan
years beyond 1998, depending on actuarial
estimates, including projected enrollment and medical cost
trends.
- more -
RightCHOICE Managed Care, Inc.
Add 2
While RightCHOICE was attempting to negotiate in good
faith with the MCHCP Board of Trustees, MCHCP counsel filed a
lawsuit against RightCHOICE, alleging, among other things,
that MCHCP is not subject to Missouri's Sunshine Law.
RightCHOICE alleges that the actions and operations of
MCHCP, with respect to these contract issues, have materially
affected RightCHOICE's net earnings and delayed its timeline
for returning to profitability. RightCHOICE anticipates a net
charge to earnings of $30 million to $40 million in 1997,
based on actuarial estimates, including projected enrollment
and medical cost trends accounted for through the year 2000 in
accordance with generally accepted accounting principles. In
addition, management anticipates that the charge may have
significant ramifications with respect to its credit facility
and maintaining regulatory compliance.
"We have experienced significant losses as a consequence
of the risk and rate structure which we believe were
unjustifiably and illegally imposed under the MCHCP," stated
John A. O'Rourke, chairman, president and chief executive
officer of RightCHOICE. "This is not a dispute with the
members served by MCHCP who depend on our coverage; rather our
concerns relate to the agency which we believe has
inappropriately and unfairly administered what should be an
important and beneficial program for state and public entity
employees.
"We are pursuing litigation only after exhaustive efforts
to resolve these issues through other means," O'Rourke stated.
SAFE HARBOR STATEMENT
"Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995: Estimates and other statements
set forth herein that are not historical facts are forward-
looking statements that involve risks and uncertainties.
These risks and uncertainties include, but are not limited to:
regulatory or court action related to the parent company's
lawsuit against the Missouri Department of Insurance and
Attorney General; other litigation; governmental and
regulatory action or legislation; actions by the Blue Cross
and Blue Shield Association related to the license
- more -
RightCHOICE Managed Care, Inc.
Add 3
to use the Blue Cross and Blue Shield names, trademarks and
service marks; market competition and consolidation; the
outcome of litigation with MCHCP and the ramifications of the anticipated
charges to income; escalating health care costs; dependence on
sales to individuals; potential of nonrenewal of subscriber and provider
agreements; voting control by its parent company; variability of operating
results and stock price; and additional factors and other risks detailed in
the company's Securities and Exchange Commission filings.
RightCHOICE Managed Care, Inc., the publicly held
subsidiary of Blue Cross and Blue Shield of Missouri, is the
largest provider of managed care services in Missouri,
covering approximately 1.9 million members.
- END -
