AGO 1957 No. 16 - Feb 12 1957
DENTAL HEALTH CARE SERVICES
(1) Dentistry is a medical care within the meaning of the definition health care services.
(2) A company organized for the purpose of selling memberships which entitle the purchaser to dental care at reduced rates is a health care service contractor and the membership fees paid constitute at least a partial prepayment of such service.
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February 12, 1957
Honorable William A. Sullivan
Olympia, Washington Cite as: AGO 57-58 No. 16
By letter previously acknowledged you have submitted to this office three questions, as follows:
(1) Is dental care a health care service as defined in section 1A of the health care service law?
(2) Is American Dental Service, Inc. a health care service contractor as defined in section 1C of the health care service law?
(3) Do the membership fees being accepted by the American Dental Service, Inc. [[Orig. Op. Page 2]] and its activities qualify it as accepting prepayment for health care services as defined in section 1C and section 2 of the health care services law, and as such require it to register under the terms of the health care services law?
The answer to all three questions is in the affirmative.
With your letter you have submitted a number of documents, including a brochure or advertising sheet, a copy of a form of contract used in solicitation by the American Dental Service, Inc. (which contract includes a schedule of comparative costs), a plan of organization of the American Dental Service, Inc., a copy of its Articles of Incorporation and a copy of the contract entered into under date of April 26, 1956, between American Dental Service, Inc., as party of the first part, and Dr. John Brown, a dentist licensed to practice dentistry in the state of Washington, as party of the second part. For the sake of brevity we will hereafter refer to American Dental Service, Inc. as the "company."
The law with which your questions are concerned is found in RCW 48.44.010 and 48.44.020 (§§ 1 and 2, chapter 268, Laws of 1947), and reads as follows:
"For the purpose of this chapter:
"(1) 'Health care services' means and includes medical, surgical, hospital and other therapeutic services.
"(2) 'Doctor' means any person lawfully licensed or authorized to render any health care services.
"(3) 'Health care service contractor' means any corporation, cooperative group or association, doctor, [[Orig. Op. Page 3]] or group of doctors who or which not otherwise being engaged in the insurance business, accepts prepayment for health care services from persons or groups of persons as consideration for providing such persons with any health care services.
"(4) 'Participant' means a doctor or hospital who or which has contracted in writing with a health care service contractor to accept payment from such contractor for any health care services rendered to a person who has previously paid such contractor for such services.
"Any health care service contractor may enter into agreements with persons or groups of persons which require prepayment for health care service by such persons in consideration of such health care service contractor providing one or more health care services to such persons and such activity shall not be subject to the laws relating to insurance if the health care services are rendered by the health care service contractor or by a participant, or by a doctor or hospital designated by such health care service contractor or participant."
Dealing with the questions in the order presented, it is our opinion that dental care is properly to be considered a health care service as defined in § 1.
RCW 18.32.020 defines dentistry as follows:
"A person practices dentistry, within the meaning of this chapter, who (1) represents himself as being able to diagnose, treat, remove stains and concretions from teeth, operate or prescribe for any disease, pain, injury, deficiency, deformity, or physical condition of the human teeth, alveolar process, gums or jaw, or (2) offers or undertakes by any means or methods todiagnose, treat, remove stains or concretions from teeth, [[Orig. Op. Page 4]] operate or prescribe for any disease, pain, injury, deficiency, deformity, or physical condition of the same, or take impressions of the teeth or jaw, * * *" (Emphasis supplied.)
Dentistry is also defined in 70 C.J.S., Physicians and Surgeons , § 1, p. 806, as follows:
"The art or profession of a dentist; a special department of medical science embracing the structure, function, and therapeutics of the mouth and contained organs, specifically the teeth, with their surgical and prosthetic treatment."
In the case ofState ex rel. Jordan v. Dept. of Licenses, 130 Wash. 82, speaking of dentistry, Judge Fullerton said at page 85:
"* * * It is an avocation that affects the comfort, health and life of the individual, and as such has always been a subject for legislative regulation. * * *"
And inCampbell v. State, 12 Wn. (2d) 460, our supreme court again treating the subject of dentistry, said at page 466:
"* * * The safeguarding of the public health, and particularly the residents of this state as individuals, from the evils of incompetent and improper dental practices, is beyond question a justifiable exercise of the police power of the legislature. * * *"
Since diseases of the teeth, gums, jaws, etc., are matters affecting the health of the individual and their treatment has been made a part of both medical and surgical therapeutics, it seem clear to us that dental care is included within the definition as provided by RCW 48.44.010 (1) of the health care law.
[[Orig. Op. Page 5]]
We have been unable to find any court decisions of our state or of any other jurisdiction bearing directly on questions 2 and 3. Accordingly we are obligated to reach a conclusion and a logical answer to these questions by consideration of the factual situation involved.
Referring first to the company's Articles of Incorporation, we find in Article II, paragraphs 1, 2 and 3 that the purposes of the organization is stated as follows:
"1. To transact the business of promoting, developing and acquiring a relationship with reputable and licensed dentists, for the purpose of providing a plan or system of adequate low cost, or pre‑paid, [[prepaid]]dental care for individuals, families, groups or organizations, industrial employees groups and others.
"2. To draft, promote, sell and convey contracts providing forlow cost or pre‑paid [[prepaid]]dental care to the general public.
"3. To develop and maintain all necessary facilities, means and properties for the purpose of carrying on the promoting, selling and maintaining of alow cost or pre‑paid [[prepaid]]plan or a system of dental care for the general public." (Emphasis supplied.)
Next, we look to the brochure and the membership contract to determine just what it is that this company sells to the participating public. We find included in the agreement with the purchaser of the membership a comparative cost schedule which purports to set out the cost of a great number of dental services on the basis of what a particular service would cost a nonmember of the company, as compared to the amount it would cost a member. For illustration: the company sells to "A" a membership of one year duration for the sum of $23.00. During the period of membership the company agrees to furnish to the member, by a licensed dentist who is ethical in his practice and uses only tried and proven methods in his operation, any of his services listed on the membership card. Each and every service to which the member is entitled is to be received by him at the cost scheduled under the heading "membership costs."
[[Orig. Op. Page 6]]
Looking at the comparative cost schedule, we find listed dentures, upper and lower, approximate cost (that is cost to a nonmember), $125.00 each. Cost to members is listed as $37.50 each. Thus it appears that by payment to the company of a fee of $23.00 to cover one year of service, the member becomes entitled at any time within the year to receive a complete set of dentures, both upper and lower (which normally would cost him $250.00), for the sum of $75.00 paid to the dentist. This, with the membership fee of $23.00, makes a total cost to the member for this service of $98.00, or a net savings of $152.00.
Looking next to the contract entered into by Dr. Brown and the company, we find that in paragraphs 1 and 2 of the contract Dr. Brown agrees to perform for any member holding a membership card in the company any type of dental service listed on the membership card and at reduced prices listed under the heading "Cost to Members."
In Paragraph 3 of the contract it is agreed between the parties that if the holder of a membership contract fails to pay Dr. Brown the membership costs provided in the schedule, and after reasonable effort has been made by Dr. Brown to collect the same, the company will pay to Dr. Brown the charges fixed in the schedule of fees.
Referring now to the definition of "health and care service contractor," it would seem clear from the facts hereinabove stated that the company has accepted at least a partial prepayment from the member for the health care services promised him under his contract. The company is under contract not only to furnish the service at less than one‑half the normal price, but also, in the event the member fails to pay his additional fee to the dentist, to pay that additional stipulated cost to the dentist on behalf of the defaulting member. It is our opinion that Dr. Brown has become a "participant" in the plan as that term is defined in § 1 (4) of the act and that the company has entered into a health care service contract with him to render service which the company has contracted to render to its participating members.
The fact that the company does not undertake in all cases to furnish all the health care to the member is immaterial. As defined in § 1 (3) of the act, the company becomes a contractor if it furnishesany health care service to the member.
[[Orig. Op. Page 7]]
Obviously, a health care service is furnished and with at least a partial prepayment. Another significant feature of this operation is that the member can reach the participating dentist only through the company.
We turn now to the document included with your letter and described as "Plan of Organization of the American Dental Service, Inc." On page 6 of the plan, we find that the company officials estimated that it will take in a minimum of $120,000 in the sale of memberships during the first year. Based upon this estimate they have set up an estimate of the cost of operation. The first item on that list is salary to dentist in the amount of $24,000, followed by administrative expenses, $25,000, advertising, $11,000, etc. Thus it appears that in the plan of organization, even though this was not mentioned in the contract between Dr. Brown and the company, that the parties contemplated and intended that the company was to pay Dr. Brown a salary of $24,000 for the first year. This payment would of necessity come out of the membership fees collected by the company from the participating members. In addition, paragraph 7 of the company's agreement with the participating dentist obligates the company to make adjustments for any increase in basic costs of services provided to members or subscribers of the plan.
Thus it is clear that partial prepayment is accomplished by the American Dental Service plan, and for this reason, among others, the plan is subject to regulation according to the health care services law. The company is required to place itself under the supervision of the insurance commissioner of the State of Washington. It is subject to all the rules and regulations promulgated by the commissioner and it should be required to provide indemnity insurance or a cash deposit with the insurance commissioner as required by § 3, chapter 268, Laws of 1947 (RCW 48.44.030). It should be required to register with the insurance commissioner of the State of Washington, as provided in § 4 of the act, and to file with the commissioner, together with such registration, a copy of all contracts being offered and schedules of all rates charged.
We trust the foregoing will be of assistance to you.
Very truly yours,
JOHN J. O'CONNELL
ROY C. FOX
Assistant Attorney General