AO 2014-21: Disaffiliation of two SSFs

Cambia Health Solutions, Inc. PAC is no longer affiliated with Blue Cross and Blue Shield Association PAC because the relationship between the organizations has changed. As a result, the two separate segregated funds (SSFs) no longer share limits on the contributions they receive or make.

Background
Cambia Health Solutions, Inc. (Cambia) is a nonstock health insurance corporation that manages a number of health service plans and operates as a licensee of the Blue Cross and Blue Shield Association (Blue Cross) to engage in the sale and management of health insurance marketed under Blue Cross names and marks. As a result of these licensing agreements, Cambia must follow Blue Cross policies, participate in certain Blue Cross programs, and satisfy certain financial benchmarks.

In an earlier advisory opinion (AO), the Commission concluded that Blue Cross was affiliated with each of its licensed plans in the United States. See AO 1990-22 (Blue Cross).

Although most of Cambia’s business is conducted under Blue Cross marks, it has expanded into other businesses, including some that compete directly with other Blue Cross licensees. Cambia remains a licensed plan of Blue Cross, but it maintains that the overall business relationship between the two has significantly evolved over time, and therefore the two SSFs should no longer be considered to be affiliated with one another.

Legal context
The Federal Election Campaign Act and Commission regulations specify that political committees, including SSFs, are per se affiliated if they are established, financed, maintained or controlled by the same persons, including any parent or subsidiary, branch, division, department or local unit thereof. 52 U.S.C. § 30116(a)(5) and 11 CFR 100.5(g)(2); 110.3(a)(1)(ii). Affiliated committees share a single contribution limit both on contributions received and contributions made by each committee. 11 CFR 100.5(g)(2) and 110.3(a)(1).

In the absence of per se affiliation the Commission may examine the relationship between organizations that sponsor committees, the relationship between the committees themselves, and the relationship between one sponsoring organization and a committee established by another organization in order to determine whether committees are in fact affiliated. 11 CFR 100.5(g)(4)(i). Commission regulations provide for ten circumstantial factors to be considered “in the context of the overall relationship” in order to assess affiliation status among committees or organizations. 11 CFR 100.5(g)(4)(i)-(ii) and 110.3(a)(3)(i)-(ii).

Affiliation Factors
Blue Cross played no role in the formation of Cambia, nor did Cambia play a role in the formation of Blue Cross. Blue Cross has no voting rights in Cambia and Cambia does not have significant representation on Blue Cross’ governing board (only two out of a total of 38 seats). Neither Cambia nor Blue Cross has the authority to hire, appoint, demote or otherwise control the officers or decision-making employees of the other organization.

There are also no overlapping or common members, officers or employees for either Cambia or Blue Cross, and although Cambia employs two former Blue Cross employees, of more than 5,000 total Cambia employees, this was not significant enough to indicate affiliation between Cambia and Blue Cross.

Blue Cross does provide Cambia with the exclusive right to use its marks in four individual states and Cambia provides funds to Blue Cross in the form of licensing and membership fees. Also, Cambia’s SSF has transferred monies in the past to Blue Cross’ SSF (which is permissible among affiliated committees). However, in examining the context of the overall relationship between Cambia and Blue Cross, the Commission determined that Cambia has become “substantially diversified beyond the health insurance products it markets under the licensing agreements with Blue Cross.”

While Cambia’s overall operations remain heavily tied to its licensing agreements with Blue Cross, the Commission has previously held that negotiated business arrangements between two entities do not in and of themselves result in affiliation between two or more entities. See AOs 2012-21 (Primerica), 1999-39 (WellPAC), and 1996-23 (ITT).

The circumstances of Cambia and Blue Cross are similar to the situation presented in AO 2014-11 (HCSC), where the Commission determined that the SSF of Health Care Services Corporation, another Blue Cross licensee, was disaffiliated from Blue Cross’ SSF because it had become extensively involved in other lines of business that were not affected by its agreements with Blue Cross.

Thus, the Commission concluded that Cambia’s and Blue Cross’ SSFs are no longer affiliated. They do not meet the criteria for per se affiliation and the licensing agreements between Cambia and Blue Cross are outweighed by the absence of facts that indicate affiliation between the two.

Date issued: February 12, 2015; Length: 9 pages.

Resources

• Advisory opinion 2014-21 [PDF]
• Commission discussion of advisory opinion request 2014-21 [mp3]