This Advisory Opinion concerns the following issue as formulated from facts and/or circumstances furnished by a requestor. The Commission approved this opinion on June 4, 2004, basing its approval solely on the facts and circumstances stated herein.
 

May a community hospital contract with an insurance carrier represented by a member of the county board of supervisors for the provision of supplemental insurance coverage to employees of the hospital where the employees, not the hospital, pay the premiums for the coverage?

State law restricts the Mississippi Ethics Commission to interpreting and issuing opinions on Sections 25-4-101 through 25-4-119, 1972 Mississippi Code Annotated and Article IV, Section 109, Mississippi Constitution of 1890.  Therefore, this opinion does not address the Mississippi laws outside the Commission’s jurisdiction nor the governmental entity’s internal rules and regulations.

The pertinent conflict of interest laws to be considered here are:

Constitutional Section 109 states:
 

“No public officer or member of the legislature shall be interested, directly or indirectly, in any contract with the state, or any district, county, city, or town thereof, authorized by any law passed or order made by any board of which he may be or may have been a member, during the term for which he shall have been chosen, or within one year after the expiration of such term.”

Code Section 25-4-101 states:
 

“The legislature declares that elective and public office and employment is a public trust and any effort to realize personal gain through official conduct, other than as provided by law, or as a natural consequence of the employment or position, is a violation of that trust.  Therefore, public servants shall endeavor to pursue a course of conduct which will not raise suspicion among the public that they are likely to be engaged in acts that are in violation of this trust and which will not reflect unfavorably upon the state and local governments.”

Code Section 25-4-103(a), (c), (d), (e), (f)(i)(ii), (g)(i)(v), (h), (i), (k)(i)(ii), (l), (o) and (p)(i)(ii)(iii) states:
 

“(a) ‘Authority’ means any component unit of a governmental entity.

(c) ‘Business’ means any corporation, partnership, sole proprietorship, firm, enterprise, franchise, association, organization, holding company,  self-employed individual, joint stock company, receivership, trust or other legal entity or undertaking organized for economic gain, a  nonprofit corporation or other such entity, association or organization receiving public funds.

(d) ‘Business with which he is associated’ means any business of which a public servant or his relative is an officer, director, owner, partner, employee or is a holder of more than ten percent (10%) of the fair market value or from which he or his relative derives more than One Thousand Dollars ($1,000.00) in annual income or over which such public servant or his relative exercises control.

(e) ‘Compensation’ mean money or thing of value received, or to be received, from any person for services rendered.

(f) ‘Contract’ means:

(i) Any agreement to which the government is a party; or

(ii) Any agreement on behalf of the government which involves the payment of public funds.

(g) ‘Government’ means the state and all political entities thereof, both collectively and separately, including but not limited to:

(i) Counties; and
 
(v) Any department, agency, board, commission, institution, instrumentality, or legislative or administrative body of the state, counties or municipalities created by statute, ordinance or executive order including all units that expend public funds.

(h) ‘Governmental entity’ means the state, a county, a municipality or any other separate political subdivision authorized by law to exercise a part of the sovereign power of the state.

(i) ‘Income’ means money or thing of value received, or to be received, from any source derived, including but not limited to, any salary, wage, advance, payment, dividend, interest, rent, forgiveness of debt, fee, royalty, commission or any combination thereof.

(k) ‘Material financial interest’ means a personal and pecuniary interest, direct or indirect, accruing to a public servant or spouse, either individually or in combination with each other.  Notwithstanding the foregoing, the following shall not be deemed to be a material financial interest with respect to a business with which a public servant may be associated:

(i) Ownership of any interest of less than ten percent (10%) in a business where the aggregate annual net income to the public servant therefrom is less than One Thousand Dollars ($1,000.00);

(ii) Ownership of any interest of less than two percent (2%) in a business where the aggregate annual net income to the public servant therefrom is less than Five Thousand Dollars ($5,000.00).

(l) ‘Pecuniary benefit’ means benefit in the form of money, property, commercial interests or anything else the primary significance of which is economic gain.  Expenses associated with social occasions afforded public servants shall not be deemed a pecuniary benefit.

(o) ‘Public funds’ means money belonging to the government.

(p) ‘Public servant’ means:

(i) Any elected or appointed official of the government;

(ii) Any officer, director, commissioner, supervisor, chief,  head, agent or employee of the government or any agency thereof, or of any public entity created by or under the laws of the State of Mississippi or created by an agency or governmental entity thereof, any of which is funded by public funds or which expends, authorizes or recommends the use of public funds; or

(iii) Any individual who receives a salary, per diem or expenses paid in whole or in part out of funds authorized to be expended by the government.”

Code Section 25-4-105(1), (2), (3)(a) and (4)(b) states:
 

“(1) No public servant shall use his official position to obtain pecuniary benefit for himself other than that compensation provided for by law, or to obtain pecuniary benefit for any relative or any business with which he is associated.

(2) No public servant shall be interested, directly or indirectly, during the term for which he shall have been chosen, or within one (1) year after the expiration of such term, in any contract with the state, or any district, county, city or town thereof, authorized by any law passed or order made by any board of which he may be or may have been a member.

(3) No public servant shall:

(a) Be a contractor, subcontractor or vendor with the governmental entity of which he is a member, officer, employee or agent, other than in his contract of employment, or have a material financial interest in any business which is a contractor, subcontractor or vendor with the  governmental entity of which he is a member, officer, employee or agent.

(4) Notwithstanding the provisions of subsection (3) of this section, a public servant or his relative:

(b) May be a contractor or vendor with any authority of the governmental entity other than the authority of the governmental entity of which he is a member, officer, employee or agent or have a material financial interest in a business which he is a member, officer, employee or agent where such contract is let to the lowest and best bidder after competitive bidding and three (3) or more legitimate bids are received or where the goods, services or property involved are reasonably available from two (2) or fewer commercial sources, provided such transactions comply with the public purchases laws.”

Pertinent facts and circumstances provided by the requestor, absent identifying data, are set forth as follows and considered a part of this opinion.
 

This firm represents a Regional Medical Center (RMC), a community hospital.   The Board of Trustees of RMC are appointed by the County Board of Supervisors.

Historically, insurance carriers have approached RMC seeking to provide supplemental health insurance coverage for the employees of the hospital.  Premiums for supplemental coverage are paid by the employees, not by the hospital.  RMC reviews the requests of the insurance carriers annually.  If more than one carrier submits a proposal, RMC selects the carrier with the lowest and best proposal.  Once the selection is made, RMC enters into a contract with the insurance carrier giving that carrier the exclusive right to present proposals to the hospital’s employees for supplemental health coverage.  An insurance company has been the provider of the supplemental insurance to RMC’s employees for at least the past three years.

A newly elected member of the County Board of Supervisors is also an agent or representative of another insurance carrier.  He has requested that RMC select his company as the designated provider of supplemental health insurance coverage for RMC’s employees.

May a community hospital contract with or endorse an insurance carrier represented by a member of the County Board of Supervisors for the provision of supplemental insurance coverage to employees of the hospital where the employees, not the hospital, pay the premiums for the coverage?

Based solely on the facts and circumstances presented by the requestor, the Commission’s opinion is as follows.

Constitutional Section 109 and Code Section 25-4-105(2), both cited above, prohibit a public board member, including a county supervisor, from having an interest, direct or indirect, in any contract authorized by his board during his term and for one year thereafter.

In Frazier v. State, 504 So. 2d 675, (Miss. 1987), the Mississippi Supreme Court set forth the four elements for applying the prohibition imposed by Constitutional Section 109. The four elements are:
 

1. Is there a governmental contract with the state, county, municipality or district?

2. Does the public officer have an interest, direct or indirect, in the contract?

3. Is the contract authorized by a law passed or order made by a board or public body of which the public officer is a member?

4. Was the authorizing law or order passed during the public officer’s term or within one year after the expiration (or termination) of such term?

 In this instance, the community hospital’s contract giving the exclusive right to present the insurance proposals to its employees is a government contract. Also, the county supervisor has a direct interest in the contract as the insurance carrier’s representative on the proposal and also an indirect interest as an employee of the insurance carrier.

Regarding the question of the county board of supervisors’ authorization of the contract, the Mississippi Supreme Court has ruled that the appropriation or approval of funding or expenditure authority for a governmental entity by another governmental board is part of the contract authorization process of that governmental entity’s contracts. Section 41-13-47, 1972 Mississippi Code Annotated, provides that the board of trustees of a community hospital shall on or before the first Monday of each September submit the community hospital’s proposed budget to the community hospital’s owner(s) for approval by the owner(s) on its official minutes. Even if it makes no direct appropriations to the county-owned community hospital, the county board of supervisors has approval of funding authority for the county-owned community hospital by way of Code Section 41-13-47. Not only does the board of supervisors have the responsibility to approve or disapprove the county-owned hospital’s budget but any amendments, changes, increases or deceases initiated by the board of trustees must be presented subsequently for approval by the board of supervisors.¹

Notwithstanding the board of supervisors’ authority over a community hospital’s budget under Code Section 41-13-47, the community hospital in this instance is not using hospital funds to pay for the insurance coverage as it is being paid for in full by the hospital’s employees.

Therefore, Constitutional Section 109 and Code Section 25-4-105(2) will not prohibit a community hospital from contracting with an insurance carrier that has as one of its representatives a member of the county board of supervisors that owns the community hospital for the provision of supplemental insurance coverage to employees of the hospital when the hospital’s employees pay the premiums for the coverage.

 Notwithstanding the above, the community hospital’s contract with the insurance carrier results in the insurance carrier being a contractor with the county through its authority, the community hospital, for purposes of Code Section 25-4-105(3)(a), cited above.

 Code Section 25-4-105(3)(a) prohibits a public servant, including a county supervisor, from having a material financial interest in any business that is a contractor with the public servant’s governmental entity, in this case county.

 Code Section 25-4-103(k)(ii), cited above, defines a material financial interest as ownership of any interest of less than two percent (2%) in a business where the aggregate annual net income to the public servant therefrom is Five Thousand Dollars ($5,000.00) or more.
 
Therefore, Code Section 25-4-105(3)(a) will prohibit the community hospital, as an authority of the county, from contracting with the insurance carrier in question if the county supervisor earns an aggregate annual net income of $5,000.00 from the insurance carrier. There is one limited exception that would allow the contract in question without violating Code Section 25-4-105(3)(a). That exception is found in Code Section 25-4-105(4)(b), cited above. Specifically, the insurance contract must be let to the insurance carrier as the lowest and best bidder after competitive bidding and three (3) or more legitimate bids are received.

 Assuming the Code Section 25-4-105(4)(b) exception is met, the county supervisor may not to use his official position to assist himself or his insurance carrier employer in obtaining the exclusive right to sell the insurance coverage to the hospital’s employees. Should he do so, the county supervisor would be using his official position to obtain a pecuniary benefit for himself and/or a business with which he is associated in violation of Code Section 25-4-105(1), cited above.

The issue presented by the requestor also must be viewed as it relates to Code Section 25-4-101, set forth above. This code section sets the tone for the conflict of interest laws as the Legislature’s “Declaration of Public Policy.” This public policy can be summarized as any circumstance having the potential of creating suspicion among the public and reflecting unfavorably upon the state or local government should be closely reviewed by public servants with the intent to reduce or eliminate any suspicion on the part of the public which detracts from the public’s trust in state or local government.

 Clearly, the county supervisor acting as the representative of the insurance carrier under an excusive contract with the community hospital owned by the county he serves is a circumstance that can be expected to create suspicion among the public and reflect unfavorably upon the county board of supervisors and the community hospital board of trustees. Therefore, in order to comply with the public policy mandate set forth in Code Section 25-4-101, the community hospital board of trustees should not approve the exclusive contract with the insurance carrier if the county supervisor will be acting as the insurance carrier’s representative under the contract.
 

Scott Rankin
Executive Director
 

¹ See Official Attorney General’s Opinion to Joseph J. Ross, June 27, 1991.