Maryland Medical Service, Inc. v. Carver

Barnes, J., delivered the opinion of the Court. This appeal involves the construction of the Act of 1963, Chapter 548, which amended the non-profit health plan sec ⁴⁷¹ tions of Article 48A of the Code in regard to insurance, now codified as Sections 354 to 361, to provide for chiropodial care rendered by chiropodists under these plans. By the 1963 amendment the words “chiropodist” and “chiropodial” were inserted in appropriate places in the existing statutes and to Section 355(b) (2) were added the words: “and that each subscriber shall be entitled to reimbursement for any such chiropodial service, whether the said service is performed by a doctor of medicine or duly licensed chiropodist.” The basic question in the case is whether the provisions of the 1963 amendment are permissive or mandatory. In a declaratory judgment proceeding brought by two certificate holders of the Blue Shield Plan and by two chiropodists, in the Circuit Court for Baltimore County, Judge Raine held that the proper construction of the 1963 amendment was that it was mandatory and entered a decree carrying that decision into effect, but provided in the decree that the two certificate holders were not entitled to reimbursement for services rendered by chiropodists under their existing Blue Shield contracts.

The operator of the Blue Shield Plan has appealed from the decree declaring that the existing Blue Shield contracts do not comply with the requirements of Code, Art. 48A, Sec. 355(b) and the certificate holders have filed a cross appeal from the portion of the decree which provides that they are not entitled to reimbursement under their existing certificates. The Insurance Commissioner who was also a party defendant in the lower court, has not entered an appeal from the decree. The appellant, Maryland Medical Service, Inc. (Blue Shield) is a Maryland corporation without capital stock organized in 1950 to establish, operate and maintain a non-profit health service plan authorized by the Acts of 1945, Chapter 752, Sections 235 to 242, now as amended, Code, Art. 48A, Secs. 354 to 361. The non-profit health service plan established and operated by Blue Shield is known as the Maryland Blue Shield Plan (Blue Shield Plan).

The original by-laws of Blue Shield indicate that it was ⁴⁷² formed under the auspices of the Council of the Medical and Chirurgical Faculty of Maryland and the Director of the Maryland Hospital Service, Inc., the operator of a non-profit plan for rendition of hospital services (Blue Cross), also incorporated under Art. 48A of the Code. Following its incorporation and the adoption of its by-laws, Blue Shield entered into agreements with eligible physicians in Maryland (participating physicians) and adopted a Participating Physician’s Manual (Physician’s Manual) setting forth the monetary benefits which would be allowed subscribers for specified services rendered by participating physicians, or by nonparticipating physicians. If the specified services were rendered by a participating physician the payments for those services were made directly to that physician by Blue Shield; if the services were rendered by a non-participating physician, Blue Shield made the payments directly to the subscriber. In the Physician’s Manual, it is stated, inter alia, that: “Subject to express provisions of law, there shall be free choice by the patient of any duly licensed physician practicing in the area served by the Plan.” Under the heading “Participating Physicians” appears the following : “Participating Physicians agree to accept the benefits provided by Blue Shield as full payment for services rendered a subscriber whose income classification makes him eligible for ‘service benefits’ (see section following). “Inherent in the basic Blue Shield concept is the right of every licensed physician in Maryland to participate in the Plan, and the right of the patient to select his physician.

The doctor-patient relationship is not encroached upon; simply, the Plan rather than the patient pays the fee. Just as the Plan does not interfere with the patient’s choice of physician, it imposes no restrictions on the physician’s method of diagnosis or treatment.” (Emphasis supplied). ⁴⁷³ Under the heading “Service Benefit Provisions” the Physician’s Manual provides: “Under the terms of this participation agreement, a Participating Physician agrees to accept as payment in full the Blue Shield benefits for covered services to subscribers whose annual incomes do not exceed stipulated amounts. If the subscriber’s income is in excess of these limits, the physician may bill the subscriber for the difference, if any, between his usual fee for the services provided and the Blue Shield benefits. This unique service benefit feature provides many Blue Shield subscribers with paid-in-full protection while still preserving their complete freedom of choice in the selection of their physicians.” (Emphasis supplied).

Seven areas of benefits are specifically excluded. Among them are: “(4) Oral surgical services provided by a doctor of dental surgery.” There is no specific exclusion of chiropodial services. In Section IV, under the heading “Partial Schedule of Blue Shield Benefits” appear three items of coverage relevant to this case. These are : Plan A Plan B “Drainage of infection of nail fold with or without removal of nail.” $ 15.00 25.00 “Excision of nail bed or nail fold, partial or complete.” 20.00 30.00 “Avulsion of nail” 10.00 15.00 It is also provided in the Physician’s Manual that when services are reported by a Participating Physician, payment is made directly to him but “when services are reported by a nonparticipating physician, payments are made directly to the subscriber.” Blue Shield issued Membership Certificates to applicants.

The certificates involved in this appeal is a “Class A Certificate” issued to the appellees William M. Hinkle and F. A. Bridgers. ⁴⁷⁴ These certificates provide specifically that “Service Benefits will not apply to Oral Surgical Services when rendered by a doctor of dental surgery.” Under Article IV “Limitations and Exclusions,” it is provided: “1. The following are not covered by this Subscription Agreement: “F. Care of corns, bunions (except capsular or bone surgery therefor), callouses, nails of the feet except radical surgery for ingrown nails, flat feet, fallen arches, weak feet, chronic foot strain or symptomatic complaints of the feet, except when major surgery is performed;” There is also a provision that where the services are rendered by a non-participating physician “payment for such services shall be made by Blue Shield directly to the subscriber for the charge by the physician in an amount up to but not exceeding the amount specified for such services in the Schedule of Benefits.” The Subscription Agreement may be terminated either by the applicant or by Blue Shield upon giving 30 days prior written notice. The membership certificate contains no provision for renewal. It provides that rights and benefits accrue to a subscriber only during the period for which subscription charges have been accepted by Blue Shield.

It further provides that the agreement terminates after the expiration of 30 days from the due date of subscription charges or by either Blue Shield or the applicant at any time giving 30 days’ prior written notice to the other party. The appellants Hinkle and Bridgers paid subscription charges subsequent to June 1, 1963 and these charges were accepted by Blue Shield. The form of Membership Certificate appearing in the record was printed after June 1, 1963. It is undisputed that the appellees, Melvin Carver and Michael M. Sherman were at all relevant times licensed chiropodists pursuant to Code, Art. 43, Secs. 481 to 494, but were not “Physicians” licensed and registered to practice medicine in Maryland.

It is also undisputed that Margaret Hinkle, wife of the appellee, William M. Hinkle, received services from the chiropodist Sherman on July 19, 1963 for which a statement of $20.00 ⁴⁷⁵ was submitted to Blue Cross on August 14, 1963; that Mae Smart Bridgers, wife of the appellee, F. A. Bridgers, received services from the chiropodist Carver on November 7, 1963 for which a statement of $85.00 was submitted to Blue Shield on December 12, 1963. Blue Shield refused both of these claims on the ground that “chiropodial services . . . were not included in the Membership Certificate issued by Blue Shield . . .” Presumably if the services had been rendered by a non-participating physician rather than by chiropodists, the claims would have been within the coverage of the Membership Certificate. It will be helpful to the decision of the case to review briefly the historical background of the legislation to be construed. The first statutory authorization in Maryland for this type of plan was by the Act of 1935, Chapter 476, which added ten new sections to Article 1 of the Code of Public Local Laws of Maryland for Allegany County.

This statute provided for the organization and operation of non-profit hospital service plans. Any proposed non-profit hospital service corporation was required to obtain the approval of the Insurance Commissioner and the Board of State Aid and Charities prior to its incorporation and when incorporated was permitted to enter into a contract with a duly qualified hospital for the rendering of hospital services to its subscribers provided that the rates charged “shall at all times be subject to the approval of the State Insurance Commissioner.” There were also provisions for filing annual reports with the Insurance Commissioner or his deputies, for the resolving of disputes and for the investment of funds. By the Act of 1937, Chapter 224, the ten sections of the Code of Public Local Laws for Allegany County enacted by the Act of 1935, Chapter 476, were repealed and nine new sections were added to Article 48A under a new subtitle “Non-Profit Hospital Service.” The new legislation provided for the formation of corporations for establishing, maintaining and operating a Non-Profit Hospital Service Plan “whereby hospital care is provided by a hospital or hospitals to persons who become subscribers . . .” There was provision for a license to be issued by the Insurance Commissioner, a license fee of $100.00, various requirements to be performed by the corporation prior to issuance of a license, with provisions for approval of con ⁴⁷⁶ tracts, rights of visitation and inspection, and revocation of licenses by the Insurance Commissioner. There were also provisions for the filing of annual statements, for the restriction of investment of funds, for exemption from taxation both state and local, and for various penalties for violation of the Act.

There was an important amendment of one section of the public general law by the Act of 1941, Chapter 906, principally in regard to the license fee (reducing it from $100 to $10.00 as provided by then Section 36 of Art. 48A). A significant change in the law was made by the Act of 1945, Chapter 752. The sub-title in Art. 48A of the 1939 Code (and 1943 Supplement) was changed from “Non-Profit Hospital Service Plans” to “Non-Profit Health Service Plans.” In addition to hospital care, the 1945 amendments provided for “medical or dental care” as additional purposes for which the nonprofit corporation could operate. The new Sec. 235 included the words “medical or dental care” in addition to “hospital care.” This Sec. 235 became Sec. 326 of Art. 48A of the 1957 Code; and is now Sec. 354 of the Code (1964 Supp.).

In Sec. 236(2) as amended, it was provided that the Insurance Commissioner before issuing the license and payment of the license fee should be satisfied: “(2) That each contract executed or proposed to be executed, by the applicant and any hospital, physician or dentist for the furnishing of hospital, medical or dental service to the subscribers to the Health Service Plan obligates, or will, when executed, obligate each hospital, physician or dentist party thereto to render the service to which each subscriber may be entitled under the terms and conditions of the various contracts issued, or proposed to be issued by the applicant to subscribers to the Plan.” This Section 236 became Section 327 of Article 48A of the 1957 Code, and is now Code (1964 Supp.) Section 355. In Section 237 the provisions for care by physicians and dentists in addition to hospital care were added. This Section 237 became Section 328 of Article 48A of the 1957 Code, and is now Code (1964 Supp.) Section 356. Into this legislative setting, the Act of 1963, Chapter 548 (introduced into the General Assembly of Maryland as Senate Bill ⁴⁷⁷ 231,) with which we are particularly concerned in this appeal, was enacted.

The 1963 Act recites in its title that it is an “Act to repeal and re-enact with amendments, Sections 354, 355 and 356 of Article 48A” of the 1957 Code “amending the laws concerning non-profit health service plans in order that chiropodial care and services may be rendered under contracts made as a part of such non-profit health service plans, and that subscribers under such contracts be entitled to reimbursements for such care and services, whether performed by a doctor of medicine or duly licensed chiropodist.” In the body of the Act, Sections 354, 355 and 356 are amended to add the words “chiropodist” or “chiropodial” where appropriate to have chiropodists or chiropodial services included with hospitals, physicians or dentists or with medical or dental care, as the case may be. In Section 355(b)(2), however, as we have already indicated, significant additional lines were added so that it read as follows: “That each contract executed, or proposed to be executed, by the applicant and any hospital, physician, chiropodist or dentist for the furnishing of hospital, medical, chiropodial or dental service to the subscribers to the health service plan, obligates, or will when executed, obligate each hospital, physician, chiropodist or dentist party thereto to render the service to which each subscriber may be entitled under the terms and conditions of the various contracts issued, or proposed to be issued, by the applicant to subscribers to the plan, and that each subscriber shall be entitled to reimbursement for any such chiropodial service, whether the said service is performed by a doctor of medicine or duly licensed chiropodist.” (The emphasis supplied indicates the words added by the 1963 amendment). The prior decisions of this Court have established the principles which will guide us in construing the Act of 1963, Chapter 548. The cardinal rule of construction of a statute is. to discover and to carry out the real legislative intention.

Barnes v. ⁴⁷⁸ State, ex rel Pinkney, 236 Md. 564, 574 ; 204 A. 2d 787, 792 (1962). Case,y Development Corp. v. Montgomery County, 212 Md. 138 , 129 A. 2d 63 (1957). The legislative intent is to be sought in the first instance in the words used in the statute and if there is no ambiguity or obscurity in the language used in the statute, there is usually no need to look elsewhere to ascertain the intent of the legislature. Board of Supervisors of Election of Baltimore City v. Weiss, 217 Md. 133 , 141 A. 2d 734 (1958).

See particularly the comprehensive review of the prior Maryland cases at pages 136 and 137 of 217 Md. If the legislative intent is expressed in clear and unambiguous language, this will be carried into effect by this Court even if this Court might be of the opinion that the policy of the legislation is unwise, or even harsh or unjust, if no constitutional guarantees are impaired by the legislation. Schmeizl v. Schmeizl, 186 Md. 371 , 46 A. 2d 619 (1946). In construing the words used in the statute, this Court will consider them in their natural and ordinary signification; if, however, the words used in the statute are of doubtful meaning, this Court in determining the legislative intent, will consider not only their usual and literal meaning, but their meaning and effect considered in the light of the objectives and purposes of the enactment and the consequences resulting from one meaning rather than another meaning, with the real legislative intent prevailing over the intent indicated by the literal meaning of the words used. Height v. State, 225 Md. 251 , 170 A. 2d 212 (1961).

This Court should also read all parts and all sections of the sub-title “Non-Profit Health Service Plans” together to arrive at the true intention of the legislature, as these sections form part of a general legislative system governing this subject matter, Height v. State, supra. We have concluded that Judge Raine’s construction of the Act of 1963, Chapter 548, was correct, i.e., that by the clear and unambiguous language used the last clause in Section 355-(b) (2) of Article 48A is mandatory, rather than permissive, and requires Blue Shield to reimburse its subscribers in contracts entered into subsequent to June 1, 1963 when the Act was effective, for covered services when performed hy a chiropodist and not by a physician. It is provided in the last clause of Section 355(b)(2) that ⁴⁷⁹ “each subscriber shall be entitled to reimbursement . . .” (Emphasis supplied). Ordinarily the word “shall” is mandatory and it is presumed that the legislature used this word in its usual and natural meaning unless there is something in the legislation to indicate otherwise.

In Barnes v. State, ex rel, Pinkney, supra, 236 Md. 564, 574-575 , 204 A. 2d 787, 792 , Judge Oppenheimer speaking for the Court stated: “. . . the word ‘shall’ of itself demonstrates a mandatory intent unless the context indicates otherwise.” See Elmer v. Commissioner of Insurance, 304 Mass. 194 , 23 N.E. 2d 95 (1939), in which the Supreme Judicial Court of Massachusetts in construing a statute in regard to the organization of a mutual insurance company to carry on the business of liability, collision and health insurance, construed the word “shall” in the clause providing that the Insurance Commissioner shall enter his approval on the articles “as mandatory and not directory.” Mr. Justice Qua, speaking for the Supreme Judicial Court of Massachusetts, stated: “ ‘Shall’ in a statute is commonly a word of imperative obligation. It is inconsistent with the idea of discretion.” 1 See also State, ex rel, Tollefson v. Novak, 7 Wash. 2d 544 , 110 P. 2d 636 (1941) and Creteau v. Phoenix Assurance Co. of N. Y., 202 Va. 641 , 119 S. E. 2d 336 (1961); 42 Op. Atty. Gen. of Md. 303, December 26, 1957 (opinion by Honorable C. Ferdinand Sybert, Attorney General and now a judge of this Court) and 41 Op.

Atty. Gen. of Md. 424, July 27, 1956 (opinion by Norman P. Ramsey, Deputy Attorney General). Our examination of the other sections under the Sub-title “Non-Profit Health Service Plans” not only fails to indicate that the word “shall” was not used in the mandatory sense, but the words used in these sections indicate to us that this word was deliberately used by the legislature in its mandatory sense. ⁴⁸⁰ Throughout the eight sections there is a careful and precise use of the words “shall” and “may” to indicate mandatory and permissive or discretionary purposes, respectively. In Section 354, it is provided that a corporation formed to establish, maintain and operate a non-profit health service plan “shall be governed and regulated by the provisions of this subtitle . . . and no law hereafter enacted shall apply to such corporations, unless they are expressly designated therein and specifically refer to such corporation.” (Emphasis supplied).

These provisions are mandatory and not permissive. In Section 355(a), it is provided that no corporation “shall issue contracts” (emphasis supplied) until licensed by the Insurance Commissioner. This is mandatory. On the other hand, in Section 355(b)(4) when discretionary power is intended to be conferred, it is stated “and such reserve as the Insurance Commissioner may deem adequate.” (Emphasis supplied).