 that starts on the bottom of page 4 and continues on to page 5? Yes, it starts with the cost shift during the 2019 UHB hearing. So in response to the question about what impact has the cost shift had on premiums, we did pull the reports published by the board that calculates the Medicare and Medicaid reimbursements and quantifies the amount of cost shift. So at the top of page 5, we compared the total revenue for all Vermont hospitals, what percentage of that revenue is commercial, and then did some calculations to allocate a percentage of the commercial spend that's attributable to the cost shift, which we estimate to be just under 35%. And then Paul's team pulled together a response in this paragraph that just used that estimate to speak to maybe the middle of that following paragraph that said, as a result in calculation, it needs to rate a decrease of 16.8% from file rates if this cost shift at Vermont hospitals were to be completely eliminated by 2020. So is this just quantifying the fact that the cost shift isn't embedded in that commercial money? So the cost shift is clearly a pressure on premiums, and I would then think indirectly a pressure on your RBC, a risk-based capital ability to earn a surplus if you're having to deal with year-in-a-year rising tire cost shift from Medicaid or Medicare then that reduces your flexibility to respond to some of the surplus issues that you're trying to address. Well, the change in the cost shift over year-to-year will be reflected in the trend analysis that we have for our team goes together. I think that shifts higher or lower in form of unit cost or utilization that will get calculation. So it's embedded in the results. And it's a big number. It's a team related to it. Thank you. I guess I'm wrong. I'm sure you're getting hungry, but it's getting hungry and higher. So I wouldn't mind not being concise. I just want to hunger. I just want to hunger. Okay, a lot of me. So as a CFO, is it safe to assume that you're involved in strategy decisions for the company? Yes. So then I'm hoping you can help me understand some long-run strategy here. In exhibit 1, page 1289, you and your member reference the pricing advantage for the competitor in this particular market. But I suspect that, as Mr. Phillips confirmed, the competitor's pricing advantage has led to a declining market share of Blue Cross Blue Shield has led to declining enrollment of Blue Cross Blue Shield has led to increased risk for Blue Cross Blue Shield has not been mediated by the risk transfer amount. So that in turn has led to higher administrative costs per member per month and potentially higher point costs again are not mediated by the risk transfer rate which in turn has led to declining solvency and the need for higher and higher premiums. So what I think I'm describing is somewhat of a death spiral, right? You're sort of getting into a model where the competitor's pricing advantage leads to these other consequences that leads to a need for higher and higher premium growth to cover the higher administrative costs per member per month and the claims costs that are not being covered by the risk adjustment. Leads to higher deviations, leads to higher premiums, leads to greater competitive advantage. Where does this end? What can we expect going forward in terms of administrative costs going forward and needs for CTR and solvency to cover these higher administrative costs? Just can you help me understand where this goes? I can tell you it's a challenge. The market share shifted in a normal health insurance market. What will happen is if the rates go up and up, the members will go elsewhere. In his testimony, we are all as possible. We also banked on just the continued service and services to the customer that we have on the list. The market share has to find a lot. It started out at 90%. I think many of us are thinking that their market share of 60% or two-thirds, as I think Paul testified earlier, is not a bad market share. So I think it's important for the trustee children to do what we're doing to the cost of care for our members and still have access to the care that they need. In the meantime, we also need to make sure that we're being responsive to other markets that are market and leading self-employed marketers in a place that's not firing up also. In some respects, we work out the issues. If it's mostly due to the instinct that will figure that out, certainly it will actually help. In the past few years, we've crossed the shoulder of the loans kind of a platinum meeting type, number of scanners, the MVP segment is more of a bronze-y type. That itself tells us that we're in the market and our, especially the standard plans are priced between the carriers. But beyond those technical issues, it's really back to what was suggested. In addition, we have such a significant increase in the specialty drug and the medical pharmacy app, the site of something that we'll be working on as well. That is the source of this large trading increase irrespective of the risk-coding issue. And the latest, I mean, as I think about it, we can figure out ways from the system, limiting ways from the system. These premium costs, which will increase access and affordability for consumers, it'll improve solvency, so that there's less waste and less claims to costs. And no expense to quality, right, of providers and patients if effectively it was a wasteful, non-health gaming services. The last year, Dr. Clayton, I believe, testified that there were significant waste in the system, just in general, none. Unique to Blue Cross Blue Shield, but across the country in terms of health care, wasteful expenditures. We've seen various numbers, but in the double digits of percentages of the medical expenditures. And I'm wondering, with that in mind, can you talk to me a little bit about strategically what Blue Cross Blue Shield is doing to eliminate wasteful expenditures, reducing unwarranted variations in care for costs that are choosing providers that are, you know, appropriately utilized. And I just want to reference the axiom reports since it came out a little bit earlier in this testimony on the exhibit 17, page 38. There is reference to care management effectiveness. And I guess axioms have done a abbreviated analysis of Blue Cross Blue Shield's care management effectiveness. I'm sorry, can you talk about page 4? Page 38 of exhibit 7? And it just referenced axioms abbreviated, so abbreviated analysis of Blue Cross Blue Shield's care management effectiveness based upon only a few, but key utilization metrics. Inpatient days per thousand, ER utilization per thousand, office visits per thousand, and scripts per thousand. And they represent the unilaterally uniform, you know, extensive analysis they did here. But based on that review, as you can see in the last paragraph there, they noted opportunities for improved measures. I'm wondering if there are, you know, internal assessments that you're doing about care management effectiveness, utilization review that might, as a result of this study, that suggests that there are opportunities for reductions in wasteful expenditures. Do benchmarks against other blues? Is this going to be a potential way to reduce waste? The answer to that is obviously yes. There's a number of programs, and I'll refer to Paul's testimony, even the lab youth advantage. As we benchmarked against the spend on labs, you can see that we were very high or might expect looking at other industry measures. So we did set about looking at opportunities for the waste out of the lab part of the process. So the medical appointment needs some labs, but they don't always need a whole lab markup. So that's a good example of identifying a place where we had not previously been necessarily benchmarking the lab against something else. So in the AXE report, they can see that we were reporting and measuring and benchmarking the number of items relative to parent education. But there are some other variants that we could do more measuring and compare in the lab, which is a good example of one of those. And I expect that they'll be able to look at and improve. Of course, oftentimes it takes more administrative costs to go after that. And so to the extent that we'll be looking at the ROI of whether or not it costs us more money to go find those savings or waste we're constantly looking at the ROI on each of those ideas as it comes along. Great. My final question actually relates to something that I think the process was relatively excited about last year. It was a new web-based tool that was going to engage customers in some sort of incentive campaigns around the consumer. There was no anticipation of savings in 19, but I think there was a hope again that this would be an initial investment and you could see savings later on. So that along with the price transparency tool for consumers, I'm wondering if either of those are translating into savings or changed consumer behavior. So what are these ways? You mentioned the web-based application. We were mainly excited about that. That has been rolled out. And that is a good example. We need to find a more efficient way to have a right time. So instead of having phone calls from nurses and spending relatively expensive resources on that, the tool allows us to engage at a level that's much more efficient. I'm going to look at my colleague Andrew to speak a little bit more to our experience in using those tools. But that's a really good example of something that we need to reach more people. But we do know that it all depends on the uptake of these tools. And I'm the ones into expressions and things like that. So in some ways we can put those out there. But it's up to the members to use them and engage with us in using those tools. So I guess some follow-up to that, and you can just draw on the questions. But I am curious about the uptake of both the price transparency web tool and its tool to see the tactic in your panel. But I think it's been still professionally realizing that people have to be aware of the application process, but doesn't actually potentially have us as far alive. The current customer experience tool, you know the uptake is quite low, and what we find is that people call our extra service folks and ask them, and then together with the members that in the extra service rep will look and use the tool. So it's having an impact, but it's relatively small in terms of engagement with people who are actually using it. Thank you. I just want to touch on some of the changes that have been heard from RBC. And looking at your five years was paid 68 visit of 21. And the net underwriting loss of 15.92 in 2018. I just want to clarify something I thought you said that there was a charge. Was there to be, you said another $7,000,000 for the risk transfer? Yes, that's correct. So the final risk adjustment came with the portfolio in 2018. It was higher than what was recorded in these results. So that would be about 7. And then in your exhibit 10 page 3 there's discussion about the 7200 cost sharing reduction that you actually are trying to recoup. And two things one, I know when you built your estimates for that year they were assumed you would get that. And then 2018, which is the bulk of the 7.2 million loss that impacted your 18 results. So I know that the loss, not saying that was 15 million, but when I look at it you're going to get back about half of that due to the risk adjustment. And then the other half related somewhat to the CSR. This is true. And do we have the status on if you're going to get this CSR piece? The status was included as you indicated in question 3. So building kind of in 2018 you have 495 parties. And if those two things were adjusted that's about 60 RBC which would bring it up to about 550. But more importantly if we look at exhibit 21 page 6 and two big drivers on that page were referred to before which were really the networking contacts and the change in the assets. I'm sorry I just need to catch up with you Page 6 of the annual discussion. So in 17 and 18 and I kind of took them together to say that it was a pretty extraordinary change. And so in 2017 the net change was about 17 million reducing your surplus. Which one of those are you referring to? Plus deferred income offset by the not admitted assets of about 6 million. So that was a change without 17 million. And carry forward to 2018 that's another 7 million. And I understand we're going to get those back somewhat one week. But the reason I'm pointing that out is we've talked a lot about what's happened over the last few years and what's gone on with RBC and specifically in the past four years and what's 663, 590, 550, and 495. And if I look in 2017 to the 550 and I add back the 80 for these two things here because those were fairly extraordinary for that specific year that's going to bring that up to another to about 640. And if I carry that forward to the next year and we started at 495 and I add the 78 back that brings us up to 583. And they add 31 million for this 31 back for the 7 million change that we're going to have that you took out in 2018 that brings us back to 614 and then we just talked about another 15 million 70 which went us up to 680. The reason but let's take and forget the 15 million for right now that 614 is kind of apples to apples to what we've looked at the past couple of years because I'm just taking out those two things that you did before the tax which we'll come back later. I'm not going to say I know you're at 495 and that doesn't change but there's been a lot of talk about the reason that your RBC has gone down so significantly is because of all the actions that we've done over the past few years and that's certainly impacted you've had losses. But when I look at those changes you were at 663 in 2015 you went down to 590 this brings it back up to well over 600 which is now within the acceptable rate of T-credits. And I know we all get it back and you added it back in later but I just wanted to really kind of bring that that one change had nothing to do with anything that had to do with you guys going through and deciding these were not admitted you had to change that. So it wasn't ever I mean the big change was in 2017 I was in there but not the entire amount but in 2017 you reduced your surplus by 19 million that we reduced it again by 7 million. So we had $26 million of production to surplus not even touching on there was another $5 million reduction for changes in pension in 2018 as well as losses in 2018 but I just think it's good to kind of put it in perspective that that change which we will add that later which gets you off of the 495 you know certainly puts us well within the range of where we need it to be even with the new guidance. And I agree and it is a one-time change so when those entity credits come through they are good because they are coming through because we need to have an event. So the absolute critical thing to go forward is to have sure you took them out as a one-time event in 2017 in 2018 and they had been in there before so if we took them out every year from the RBC the net change in the RBC would be significantly less we could go back and say where were they in 2016 and 2017 but in 2017 they made the change and they had been in their circle so the only 13 million had been in surplus prior or sorry only 4 million had been in surplus prior so the net change is the 46 in the 29 in 2017 and is that something that is typical every year to have those big adjustments that is true it is not typical to have those big adjustments I am not disputing that there is all of this I am just trying to follow all the numbers I know you are understanding the question I think there has been a change in methodology, hinge change brought your RBC way down and things will adjust later this would have been in five years as well the I think it is okay the AMT credits have not been part of the surplus but those two lines if we adjusted for those we would get us into about the 600 we would be talking about that the only other question I have is just on the cost containment strategies and how a CFO in your role would target specifically to try to get more cost containment what percentage how can we get a little more out of that year over year it is a never ending process it is a never ending process we have a group of folks inside the company who look at the quality of health they are an individual small group of segment and look at the different components of costs in that business that we found an opportunity that was both cost containment opportunity at CBC thanks so much earlier than just for me we were asked by your attorney about your response was that you said 550 per subscriber basically I just wanted to ask you to think that is a little bit misleading given the fact that a large portion of your book of business is TPA or ASO only business leading around the TPA of business is more of a credit risk whether or not you are a payment provider can you remember what your percentage was for administrative costs in the last two years not this year you mean for not this year we need 2020 in the last two great violent years 2018 something percent or seven percent the election is that they were in the sixes so I am just wondering if you would acknowledge that this year being at seven percent it is a trend in the wrong direction with the loss of membership we have had a high cost in the last seven percent but it is a higher percentage in the past the hearing officer said so I am just going to ask one final question and it is only because I asked MPP yesterday the same question that I would like to give your response and that is that in your strategies trying to do to lower costs one of the things that I hear feedback from the virus and I will give you this example they feel that by the way things are treated that they sometimes have to suggest more expensive care for their patients and the example I used yesterday is Coal Guard which is about 90 percent effective probably viable low cost alternative for those that don't have a family history and yet doctors are telling their patients at least that is what they are telling me that they should go straight for the colonoscopy because if the way Vermont law creates a screening like a colonoscopy or a rheumatography is treated one way but what happens if the doctor goes with the Coal Guard even though it is less expensive to the system that it could be much more expensive to the patient because if anything does come up then the colonoscopy will be treated as diagnostic and so it would have much higher costs out of pocket to the patient so I'm wondering if you've had those discussions about trying to take away that incentive provider to suggest the higher costs methodology I can personally see that in VRT Medical instead I notice it take away and follow up on that question okay sorry can you read the rest of this just one question history can you give a term to page 128 page 128 is this page reflect that we've crossed the continuity for the amt building that proposed rating that we're discussing today nothing critical I'm going to be correct I was hoping that you could get Andrew Brown on what you mentioned that's right yeah I think we've got to go watch so we have 30 minute lunch break do you have any additional questions board members a couple quick ones about the ACO yes we're pretty excited about the 2020 program it doesn't look like the network is going to grow very much but the ACO remains committed to the QA to be more of a business they're ready they think to take on a little bit more of this so I expect a large food pool we're also going to program in 2020 and working together with that we've made significant strides on a plan to bring self-funded clients into the program in a way that will be safe for the ACO and safe for the self-funded clients so that's very exciting also we have a couple of really effective work groups that the organization that our point was sponsoring that have really gotten into some opportunities to be think on the primary care side to both better educate about the cast and care to do that in a way that really leaves that information in for providers to make a stream so that it's actionable and also join the sponsored program to get at the 5 or 6 percent of ACO members who have not seen the primary care position at all in the last two years great and are you expecting to move to an active family fund methodology or is this a population payment we are at this point I think that will probably go into the fact that in April the providers in the system have a pretty big technology transition they're working on in the year and we'd like to get that behind them I do think the initial rollout will be a little bit smaller than we had hoped because apparently there have been some payment issues on the Medicare side and the providers want to know we have got that in the rearview mirror before they move to the fixed perspective with us so we may start with just a few hospitals in April my expectation is by the end of the year most of all the number will be joined might not happen all at once at any time there's been some payment issues on your side as well do you expect that that could also influence provider participation in growing the network I wouldn't think that that would affect our 2020 network that's far enough behind us already and we're a long way away from nailing down the 2020 network so I think that would be safely considered thank you the chair is gracious enough to let us make sure we get the back end can you please state your name and spell it for the director Dave Dillon D-A-D-E-D-I-V-L-L and what is your position when the listen else so I'm the senior vice president and principal of the listen else the Dallas office and what work does the listen else primarily makes we're a consulting firm that's how we started in 1968 but we do other areas of insurance work also compliance insurance compliance and insurance financial examination work also you've said that you've worked there for almost 20 years over 20 years can you tell us a little bit more about your educational background than your experience has your educational background and experience has actually sure I got a bachelor's degree in mathematics from Oklahoma State University and a master's in statistics and actual science from the University of Iowa I don't remember exactly when I got my credentials I've been a credentialed actuary for about probably 15 to 16 years now and do you have any professional certifications yes part of that credentialing I'm a member of the American Academy of Actuaries that's primarily kind of the professionalism standards organization and I'm a fellow at the Society of Actuaries and that's primarily education and research body and what is your experience with the Vermont health insurance marketplace so I've been involved in Vermont since 2014 we're engaged by the Green Mountain Care Board we have worked with approximately 65 items across individual small group merged market and a large group of items and what extent have you done work in finance of other states so the bulk of my personal work is I always joke I'm kind of a quasi regulator about three fourths of my personal work is with states and jurisdictions governing health insurance since 2010 my staff has worked with over 20 states and health care reform issues different aspects of it currently Lewis and Ellis is advising 12 states on ECA Breaker View and the four individuals that are primarily responsible for Vermont are working among nine states Breaker View this year and given that you've done some work with other states what kind of comparative look do you have at the nationwide health insurance what kind of comparative look do you have at the nationwide health insurance marketplace so obviously everyone in here has commented and talked about Vermont is a little bit different the market is different it's community rated however it is helpful that we work with other states because obviously with the ECA there's a lot of issues that impact everybody it may impact Vermont a little bit differently but it definitely does help to have discussions with other states and other people in terms of how market life issues and how they might impact Vermont such as the individual mandates such as AAP issues like that and are there other ways in which you keep up with teaching health care reform issues and changes in the regulatory landscape yeah so in addition to primarily working with states Ms. Lee and I are both very active with the Society of Actuaries and that keeps us very informed with health insurance issues I currently serve on the Society of Actuaries board of directors Ms. Lee is the vice chair of the Society of Actuaries health section we both were involved with a recent strategic initiative for the Society of Actuaries called Commercial Healthcare What Snacks so it's kind of through those volunteer efforts we definitely stay on top of things that we may or may not have also been interested in work issues and for those who are not aware could you explain who Ms. Lee is Jacqueline Lane can you tell us a little bit about the side of the board yes so the way I look at it and maybe fast forward a little bit to one of your next questions is in terms of how we do the review I mentioned earlier we primarily have a team of four Actuaries that work in Vermont and three are directly assigned to the Blue Cross filing Kevin Ruggeberg who is an associate of the Society of Actuaries was the primary reviewer the next in line are the primary peer reviewer for the Blue Cross filing and then Jacqueline is the secondary peer reviewer for Blue Cross and she was also and we kind of we both work on MVP filings as well so we kind of have different roles she focused on MVP but kept an eye on Blue Cross to make sure we were consistent on certain issues and me with MVP so you know I also was a secondary peer reviewer on MVP so that I can make sure that we were consistent with market life issues and speaking to the filing process generally what is the process and what sort of standards are you looking at? Yeah so in a rate filing so you know kind of mechanically everything is done through surf the system for electronic rate forms filing I think is what it stands for and that so once the company submits the filing through that there is a 60 day window a statutory window that we have to meet to issue our report so as we review those as we kind of dig in and review the filing we will submit questions through surf and the company will respond through surf and that's how we communicate with the company for several reasons one it's kind of a standardized process and it provides a kind of record after the fact of all the communication and what happens that is the improvement of your 60 day review so we will issue a final report that we send to a very amount of care board it gets posted publicly for all parties to review and that includes any recommendations that we may have and I believe that part is extended to 14 for this filing could you turn to exhibit 14? Okay and I'm specifically looking at page 2 on page 2 where it says standard of review Yes Is this the standard of review or is this the board of standard of review? So this is the board of standard of review that is the primary review that we are kind of beholden to so we assist the green mountain care board with several of these issues primarily kind of the terms excessive and adequate and fairly discriminatory but I will also note that our review there are requirements as well that we have to look at there are some federal requirements obviously with the Board of Care Act and then we also extended a couple of times today that as well as standards of practice help guide certain things that we have to review or how we review in a filing So excessive there are a couple definitions I think kind of CMS as their own that they use when they review a filing for my review it is based on actual standards of practice and what we do is we review the claims fees we review the admin piece and we kind of make sure that all those issues are good and then we compare to the premium that's proposed and make sure that the premium given the claims, given the admin given those assumptions and a reasonable assumption for profit that the premium charge for that is not excessive And how about the definition for adequate So it's basically the other side of that point once we've said that kind of review the claim review the admin and review the reasonable I guess kind of omitting the profit piece we look to see if the premiums will cover those and obviously the premiums do not cover the admin or the claims and we would say it's an adequate And how about the finance intern unfairly discriminatory? Yes, so unfairly discriminatory it doesn't come into play too often in terms of the review especially kind of in Vermont but unfairly discriminatory it is basically just confirming that a carrier doesn't charge two very similar people different rates they may live in certain geographies or have certain ages and it's just to make sure that they're charging similar people similar rates And at very point during your report you may state that the premium assumption is reasonable Could you explain a little bit about what that phrase means? Yeah, reasonable and appropriate is really just a send and in and for not excessive, not inadequate and we're not very extreme involved. And to be clear, do you review a filing for affordability? Do not, no. And was it to make any recommendations for this particular filing? Yes, we did I believe the report is based on page 24 which is at 14 while there are kind of a few multiple recommendations within each of these bullets we do have seven bullets, seven kind of high level recommendations two of those do not impact rates as of the issue of this report one may which would be certainly happens with the unit hospitals but as of the issue of this date there were five recommendations that impact our assessment of the rate which did not So in the interest of time are we then walking through each of these individual recommendations I would like to turn to exhibit 19 of everyone seeing this document had a chance to review it Yes, I have And were you present this morning that you will testify Yes, I was So I was wondering if you could just go line by line and tell us what Ellie's recommendation is and whether that remains your recommendation after the factor hearing testimony this morning And do you want me to focus on each line or just the ones that they're showing over this agreement Let's start with the ones with this agreement Okay, we'll do it The first one is the medical utilization trend When we review that There are several This is obviously a very key assumption It is kind of one of the true real kind of actual calculations assessing what is appropriate calculation for this But there are some challenges this year This is a very complex calculation Really centering around the dramatic moment shifts that we've seen between the two carriers over the last couple years Obviously if no one moves it's the same insurance company covers the same people every year It's much easier to get a better understanding of what their costs are going to be next year But it is challenging and complex to estimate what that increase is going to be when you're also losing people And the people that are sicker are sicker When did they become sicker When did they decide Did they have a decision Was it a personal decision to stay with Blue Cross because they were sick So there's a lot of underlying variables there Blue Cross in their analysis definitely did some controls to try to analyze an account We might say normalize or standardize for those moving variables However, as we look through it we wanted to ask further questions just to make sure that all variables were controlled because the market has changed so much over the last couple years And that did primarily center around kind of the health status of the company The health status of the company has changed So we had asked some questions about if the data used for the trend had to normalize for health status A and we had some preliminary information which led us to further questions And it was still in our mind at that point that there might still be some additional factors that may not have been controlled for in the data primarily to begin to center around baby enrollment decreases and increasing health status So at that point we kind of combined the analysis with MVP on a confidential basis So this was information that both CARE utilizes for both filings to help us assess the trend of both filings But one reason we thought that was helpful was while MVP has growing enrollment shifts and is relatively healthy and Blue Cross has been losing membership in the aggregate the Vermont market has been relatively stable And so when you look at it in the aggregate aggregate it does kind of mitigate those enrollment shifts and the moving around because now we are a little bit more stable there's still some issues going on in there but it is still in kind of to the comment made earlier something's more stable as these do today So that's why we looked at the market lie data So when we looked at the market lie data it did help us get a little better sense of what the market was doing Now I will say it is very clear that even after this analysis Blue Cross' utilization is higher than the market average and we do think that is supportive and believe it was mentioned that these was lower than that So obviously we have one lower retention aggregate to where that market lie is But after that aggregate analysis we did feel that it kind of did help mitigate and control for some other factors And so based on that we recommended a drop of utilization from their kind of final 3.2 to our kind of final 2.5 And after hearing the testimony this morning have you changed your recommendation as to the recommendation for our 2.5? No I have not I completely understand Blue Cross' position about the COTI That was a big topic of discussion this morning and I completely agree that is an issue to be taken into consideration However it's our position that it did not control for all of the variables in the underlying data We do believe that there can be some anti-selection even in a closed cohort when you look over multiple years time period years ago that is still around that after last renewal could make some anti-selective decisions So we believe there are some other variables kind of lurking in the data and that's why we believe using the market wide data that does help inform that Moving on to the next line which is cost trend from 2019 to 2020 In Alanie's report there was a recommendation about the board considering updating Do you have any recommendations on that aspect as of today? So obviously I have not had any opportunity to review their calculations for this estimate however based on our preliminary of the narratives for this information has not been released too long but our preliminary information is very consistent with Blue Cross' estimate So while I reserve the right to maybe have slightly different opinion once we get an opportunity to review the data this does appear to be a reasonable estimate in line with our expectations So I'm going to move down a couple of lines to individual mandate morbidity impact Could you explain a little bit about your recommendations for individual mandate morbidity impact and then maybe discuss whether that has changed in the testimony this morning? Yeah sure so with the mandate this has been a very tricky assumption that we reviewed in multiple states and this was there's a lot of different industry information on it but when we reviewed Blue Cross' assumption we felt that they were just slightly too conservative in their assumption and that was different by a couple of things one was the assumption that if there was someone that did not receive a subsidy and did not have claims that they would leave we believe that is slightly too conservative and we have seen experiences where that is not in the case of data sets we had reviewed for other states and other analyses so we just felt that it was just slightly too conservative and you know we don't believe that since yes there had been some kind of ebbs that closed with the if the mandate was you know kind of the different timelines we were not convinced that there would be that drop primarily again from the population that they would leave so we would recommend that removal of that assumption and that reviews for you about your assumptions? Correct. Changes to risk adjustment line of commitment? Yeah so you know risk adjustment could you tell us about L&E's Yeah so the risk adjustment is I'm afraid to keep it so much order because we have had some discussion about it but it is this is a very significant factor and it's very important primarily because it is a zero sum game between the market players it's a very challenging assumption for the carriers to estimate because they pretty much do it with one hand behind the back because they don't know what the other carriers are doing specifically for one other carrier so we started a couple years ago to kind of help facilitate that process you know the findings of our comment but we requested additional data and we kind of did a better number for the estimate that we delivered to both companies that helped through what kind of a starting point for the risk adjustment calculation because we did have access to both carriers one additional step we did this year was there was a change to the federal risk adjustment program they have continually tried to improve that process and this year they made a relatively significant change with some coefficients and so we took a look at that and we did believe it would have an impact to the Vermont market roughly speaking it impacted kind of the bronze-platin relationship and that is an issue that was raised by Blue Cross last year as we've been mentioning in this file and so while I don't necessarily think the CMS change was necessarily designed for that specific issue it does kind of help mitigate that and so once we ran those coefficient changes we informed both carriers that their SMN should be modified and that would be more money received by Blue Cross so those were kind of the two main issues the area of discrepancy or difference here that Blue Cross mentioned today was with regards to kind of the movement of some small groups while I have not necessarily reviewed all of those calculations I would advise the board that that would be something that would be reasonable to further look at Blue Cross's yes and moving down to new board morbidity adjustment would you please explain Emily's recommendation there yeah so the new board morbidity adjustment somewhat similar to the previous comment that was one where kind of during the review process for whatever reason further questions were not asked and further commentary was not provided for whatever reason and Blue Cross has mentioned today that that was not included so I would make the same recommendation that there should be would be reasonable for the board to review their calculations back to back to Isaac I just wanted to confirm that there were a couple of recommendations on page on page 24 a recommendation with the impact of selection I just wanted to confirm that these recommendations would have no impact on rates, is that correct? yes the impact of selection goes to the issue I raised earlier or discussed earlier about Blue Cross's concerns about kind of relationship between the metal tiers they did some additional analysis this year and kind of modified their approach and agreed with the modified approach however we kind of felt in terms of maybe an above the line below the line kind of issue we just kind of made a recommendation where it should be included it better represent what we believe that adjustment was for but it is so if you look at a couple of the exhibits you might see a couple of white swings and two of the provisions the net of those are zero for this issue and some of those recommendations do you believe that the rates if your recommendations are implemented will be excessive? no do you believe those rates would be unfairly discriminatory? changes to risk adjustment new form of mobility adjustment will you be following up with objection letter Blue Cross I guess my question is to you is the typical part of all those on how we do that I'm not sure I'll leave that open-ended Mr. Dill sorry I'm Mike I represent Blue Cross good afternoon I'm going to try to be very brief given the hour I want to focus your attention on the medical utilization trend in particular if you turn to page 11 of exhibit 14 do you see there are three bullet points do you believe L.A. has identified as the reasons why you recommended lowering the utilization trend okay and the first bullet there so the first reason says L.A. notes that the outpatient utilization trend has oscillated in recent years and has leveled off in late 2018 so that's one of the reasons we gave a follow-up to the trend yes in doing whatever work you did to come up with that reason did you compare the fourth quarter of 2018 to the third quarter of 2018 in terms of outpatient utilization trend yes we did one thing that I did not mention earlier was 2018 definitely was definitely not taking the utilization across all lines and so we did try to further review that and we did take that into consideration between different orders and between different benefit categories and how we assess what the appropriate trend to work by those categories okay and as you just said you saw an uptick in outpatient utilization as you perform that analysis yes moving to the second bullet that one reads the reduced assumption is consistent with market-wide data do you see that? yes and if you look over on page 10 the last sentence of the second paragraph reads Elleny believes that a reasonable range for market-wide utilization trend is 1% to 4% do you see that? yes so when you say that the reduced assumption is consistent oh and I'm sorry that range emerged from the market-wide analysis that you described in your correct testimony yes the 1 to 4% is 5 range for the market-wide so when you say that the reduced assumption is consistent with market-wide data you mean that it falls inside that range? yes it seems reasonable based on that range and the reduced assumption that you're talking about here is 2.5% because here you were looking at the trend after having taken account of cost containment activities correct and the comparable blue cross trend the comparable blue cross number to that 2.5% is 3.2% correct and 3.2% lies between 1 and 4% correct so blue cross's proposed trend here is also consistent with market-wide data right? yes it also falls within the range and that is your definition for this purpose of what it means to be consistent with market-wide data right? yes the word consistent I may not say it would be that reasonable but consistent yes and the reason he gave here is that the reduced assumption is consistent with market-wide data correct okay at the top of page 10 is a small table you see that? yes and that's the results of your market-wide analysis shown for three different time frames correct so if you look at the first sentence under that table you Alanie stated that your 24 month market-wide estimate for 4.2% is substantially similar to blue cross's estimate of 4.1% right? correct and just for the record if you would flip to page 6 there's a table towards the bottom of page 6 and that's where you've got the blue cross 4.1% from correct? I believe so flipping back to page 10 I think you could do that flip five times on page 10 the next sentence under the table at the top so the second sentence states that your 36 month market-wide estimate of 2.0% is materially lower than blue cross's comparable 3 year estimate of 3.1% correct and again that 3.1% the blue cross figure comes from the table on page 6 now the difference between go back to page 6 I'm sorry thank you the difference between the two blue cross numbers here the 2 year average of 4.1% and the 3 year average of 3.1% results from the inclusion of the time period 2015 to 2016 in the calculation right? I believe so I'm just kind of reading that right out of that table there you could return to page 10 please actually I think my next question is not tied to any particular page if I just want to ask you a couple quick questions about risk adjustment if risk adjustment results go up from year 1 to year 2 that would indicate that the carrier's population in year 2 is higher risk than it was in year 1 right? I'm sorry about risk adjustment results I mean the amount of risk adjustment transferred and would that be indicative of the duration of anti-selection? that would be one measure of that yes but not the only measure if on the other hand risk adjustment results defined a minute ago do not increase from year 1 to year 2 that would mean that the relevant population is not higher risk in year 2 than it was in year 1 right? and in that second scenario would that be indicative of duration of anti-selection? could you repeat the question please? sure if for a particular population the risk adjustment result meaning the amount of risk adjustment transferred did not increase from year 1 to year 2 would that be indicative of the presence of duration of anti-selection in that population? not on the surface one moment I'm either done or very close to done further questions, thank you thank you good afternoon I'd like to ask you to join Mr. Schultz in my way this is Hall of Fame I have never been accused of being a full talker I always joke at my office they sound proof of my office so everyone else can have a quiet day I have two more questions you turn to the age of 11 okay we're going out there some of the same material as Mr. DiCaprio from a slightly more perspective you say in the third paragraph that move across is the trend of year 1 to year 2.5% a year correct and MBP used originally as 0% year 1 to year 2.5% a year correct and MBP used originally as 0% year 1 to year 2.5% a year correct and you already said that 1% was more recent correct and more capacity to control the utilization trend and most of the utilization trend should be what MBP is what am I missing? there are probably a couple different issues the data is very clear that Blue Cross does have more utilization than MBP so even though we have adjusted for such as health status and this may be somewhat of a speculation but even after adjusting for health status it has something to do with the relationship Blue Cross has with its consumers and the providers we've definitely seen in other states where kind of the historical comments that the balloons are kind of the carrier plaster sort when you've got something that you go to balloons and they do tend to have higher utilization even accounting for health status so your control of health status controlling for MBP even in that case, yes it was probably likened to kind of an induced utilization factor in a way where induced utilization while very similar to health status even if someone is healthy and they have a richer benefit they're going to use it and as an actuary we don't look into the reason if you get everything charted as to whether Blue Cross should be doing more controlling utilization you're certainly going to have to do it better from the bottom of that page you see the line saying total health saying total health and the third line you say that the LNB believes that the hospital without that of a trend is going to remain between 3.5 and 6.5 percent and then go down the first bullet you see the third paragraph from bottom using volume you can recommend and change reduces the overall trend from the 5.9 to 5.2 so that 5.2 is within the range from 3.5 to 6.5 but it's built closer to the high end of the range than it is to the right so what about the 6.5 and is the 3.5 one thing to consider here is that the total allowed is it's a combination of the utilization and the unit cost and the unit cost is not really changing here it's the utilization that has the variables you pick a number within that range that's closer to the higher end than the lower end that might be the result that that is not having about picking that number I'm not accusing you of deliberately airing toward the higher end you just said that generally that number is closer to the high end than the lower end you're talking about the next gauge gauge 12 before the last paragraph you see a couple of lines and talk about the reserve so that the number could be a downward trend rather than using an average so it's always it is always tricky to I kind of looked at this earlier with the utilization trend in 2018 was higher so in time it kind of goes to the old same one times an accident twice as a coincidence three times a trend when does it become a trend at this point you know we definitely took all the data into consideration but we felt that the average was the most reasonable number for analysis for this assumption could you turn to page 13 and look at the first four paragraphs you gave me a notice it says blue cross also considered several time zones and that lets you see that I'm sorry did you point to me with a paragraph and on page 13 it would be the first four paragraphs beginning with the word specialty and then the red one half way again you see we went to the same beginning blue cross also considered several time series methods time series methods produced estimates ranging from 3.7 to 15.6 but then you go back to assume the 20% per year increase what is that so the time series methods or something that I believe I introduced to this kind of situation a couple of years ago blue cross obviously knew that I wanted to look at those time series methods and so they have started to include that analysis because they probably don't want to ask the question to anyone so they provided that information which is informative but over the years I would agree that my conclusion is those time series methods have not been as predictive as the other methods for the majority of the data analyzed so I believe it was reasonable to assume an assumption that is higher than what those methods calculated and picking an assumption more in line with the other methods do you think it would be unreasonable to assume a number within that range yes I do believe there are some numbers in that range that I would consider reasonable that wasn't exactly my question do you believe it would be unreasonable to consider any number within that range I can't answer that because if the answer is 3.7 it's a different answer than if it's 15.6 I would say I would probably if a company had submitted 15.6 I would take that into consideration I would be more likely to consider reasonable I don't know if I would necessarily say that but I would be more reasonable to consider that enough how big does a company have to be in order to be generally self-insured that is a group of two it's time to be self-insured correct next time you're steering so many years what have you come to believe what are the new size I don't know if there's a bright line however we don't typically see it historically much under 500,000 lines it hasn't gotten smaller but it changes to the market there are a few exceptions to the rule I'll speak to Lewis and Ellis we were 60 employees and we self-insured but we're also all actuaries we go ahead use the self-insure utilize that process but it's pretty it's not very likely for relatively small firms in that 50 to 100 range it's a big risk for some companies for a firm that's not all actuaries within 50 to 100 you said that Alameda is doing more this year in 12 states for state reviewers so my team is working in 9 is that on exchange business it is primary I believe that 9 is for the exchange business correct in all the states I'm not going to ask you what state you're working in in all the states you're working in approximately how many characters have filed for range changes in all those states so we have a few states that have still not filed I believe we have and actually I think while I was sitting in the back row we've received a few so I need to remain changed from a few minutes ago but I believe we've received 7 states so far how many characters are in those states so it's roughly I'm trying to think it's roughly there's one state with one individual carrier there's another state with 2 and then everyone else is usually 3 to 4 so possibly about 20 to 25 characters yes those 20 to 25 characters how many are receiving grade increase as high as blue crosses increase well I don't believe that that question is necessarily applicable because their populations are so different and they don't have community rate and they don't have merged markets so their rate increase requests are dramatically different framework I don't, but even at that I don't recall even the range of the rate increases in the other states how many of the character in any of those states that is receiving a rate increase is equal to or higher than the rate increase blue cross so you mean that character in the state I'm very hesitant because I don't, some of that work is not public and I don't want to release a name if some consider it public okay in a little space that you're working in is the average rate increase don't mean any characters but is the average rate increase sought by the characters higher than the average rate increase sought by the characters in Vermont in any of those states again I think this question is somewhat not valid because those markets are so different because of the community rate and merged market and I don't believe so I don't believe there is an average higher this year than that are there any states in which county is advising health insurers this year ACA I do not believe so no any state in which county is advising health insurers this year there are some states where I have some carriers that I do advise but not with affordable characters okay in one of those states I mean most of my minds file in multiple states I probably have to list them all okay and how many clients I probably do work I personally probably have I can think of two insurance companies that I've had the most direct contact with and are there any actuaries who are advising insurance companies in other states yes that I cannot speak to I cannot speak to how many insurance companies my business partners are would it be one and five yes probably one and ten probably one and ten I don't know no other questions thank you I just have one question can you turn to your report page 50 okay sorry did you repeat that under changes in full morbidity your second paragraph the last sentence talked about a decrease in curative enrollment across individual and smaller markets in 2019 and how that relates yes so this may not be the best word of the sentence but I think our intention here was regarding the kind of non-recognition of the risk adjustment revenue that was a reasonable assumption thank you just one quick question so as I look at these 16 factor categories on page 26 there are in this way on other keys which are the most salient in terms of the standard review the component is affordable unjust unfair inevitable which one of these should we look to to give the best insight into those issues and I ask that because this is the third place in my life where I've been involved in actual analysis one was on the state employment system the other is for state revenue estimates and there you had some kind of grounding in affordability for state product unemployment rates inflation rates and none of that is here so I guess in your mind are there any of these that are most relevant those issues I just looked at the short answer is probably to know while each of these each of these components broken out are all very important to the overall rate I don't really think any of them are necessarily any more important because they are all interrelated the morbidity and tax risk adjustment which should be done in the tax stuff the trend and things like that so I think the short answer is now very briefly you received a couple of questions regarding the market wide analysis that you did for the utilization trend and I just wanted to be clear that range was one to four percent correct and if Blue Cross had filed a one percent utilization trend would you have found that to be reasonable no and is your recommendation still 2.5 percent yes and one last question just following up briefly from Mr. Reiner so to be clear currently you are not advising any health insurers on an ACA related health insurance that is correct thank you Mr. Reiner thank you so next on the list would be Mr. Reiner missed the swerving in this morning that's right if you could stay standing do you swear I did thank you chairman board for having the department here to give a testimony from last year Chairman Mullen you said at that time that the annuals were the second best in the baseball the five games out of first place it's a great year so I do want to thank you I do want to thank you for having me here I do first want to thank the Department of Management Regulations for their good work and putting together the solvency opinion this year and for their general good work on health insurance and insurance market license as you probably know the department regulates a wide variety of financial entities nearly 600 capital insurance companies 16 traditional domestic insurance companies 23 state card banks, credit unions trust companies approximately 1,000 non-depository licensees and 50 investment advisory firms all together these companies hold well in access to 1 billion dollars and total assets to ensure the monitors are well protected and well served by these firms and the individuals that work for them so we do this there's stringent licensing requirements consumer outreach and education financial and market conduct examinations reviewing and improving products prior to their introduction to Vermont marketplace and we also do this by responding to complaints conducting investigations and enforcement actions as well over the last five years our consumer services division handled approximately 18,000 employees and combined with our market conduct actions returned 11.4 million to the monitors the restitution and 1.3 million in penalties and I say all this just to highlight the point that our department is a consumer focused organization and I'm here to testify in that aim there's nothing more important to consumer protection and the solvency of the company that we regulate all the more true in this case independent and financially sustainable bluegrass blue-shell Vermont is good for consumers because it certainly can pay its medical claims regardless of the economic conditions that I might confront in the upcoming years I can pay the medical claims regardless of unexpected medical events that might occur to the illness outbreak other extreme conditions and a financially sustainable blue-cross blue-shell will also have the capital that needs to invest in programs and people and technologies that will improve the consumer experience and more importantly improve consumer outcomes as well so the department is the primary regulator blue-cross blue-shell as the primary regulator we engage in extensive oversight of the company we do this through monitoring the company's quarterly and annual financial results examining certain metrics in those results including months of premium equivalency surplus as a percentage of revenues working capital ratios the percentage of growth are declined in the company surplus and we also continue to monitor non-insurance risk factors including credit risk investment risk, operational risk liquidity risk and reputational risk the department also conducts periodic financial examinations these exams are months long processes they involve being on site they are extensive we review the books and records of the company we interview senior management the boards of directors and further attainment in any areas that we have identified as heightened risk the department also has regular and ongoing conversations with the company regarding its financial conditions its operations and any recent developments another important regulatory tool that I think we talked about a lot today is risk-based capital or RBC I think the board knows that risk-based capital has two main components the financial calculation itself and then also the model model which we implemented here in Vermont and every other state across the country is implemented regarding when an insurance commissioner or department can take specific action based on the level of impairment on RBC I think we talked a lot about what goes into the RBC and the factors so I will skip that but if you have any questions about that happy to take them so as to our solvency opinion we talked in the past about how there has been some increased urgency as it relates to our solvency opinion that urgency is repeated and also continues to this day and the reasons for that are really fourfold Blue Cross Blue Shield risk-based capital ratio today remains at its lowest point since the establishment of the Green Mountain Care Board Blue Cross Blue Shield's ratio is the lowest among its comparative companies across the country in fact its current RBC ratio is approximately half of the average RBC ratio of comparative companies across the country Blue Cross is the only comparative company whose RBC ratio has trended downward for each of the last four years falling in a total of 171 points or 26% of its total RBC score Blue Cross Blue Shield has also fallen out of the company's recently approved targeted RBC range and where they stand today would also be outside of the previously approved range as well so one of the shortcomings of RBC is the fact that it's a historical looking formula it does not look to the future it does not look to things that might be company specific as well so there are some additional factors that I want to mention as it relates to our solvency concerns or solvency impact I should say first Blue Cross Blue Shield means a single-state wish plan this limits the company's ability to spread risks over a broad base geographically thus making more vulnerable to global risks such as epidemics, severe weather, calamities and other similar events Blue Cross Blue Shield means a non-for-profit also limits the company's source for obtaining capital basically to that of generating gains through operations or great increases and then further there continues to be unpredictability surrounding federal health care policy and it's corresponding impact on the Vermont health insurance marketplace so it continues to be a very unstable federal landscape for sure so all of these factors add to our solvency opinion these are outside of the RBC calculation but the RBC status itself does also give us pause for concern I think we also talked about and that's a credit rating agency I think folks know they are a credit rating agency that focuses on the insurance industry they rate many of the companies that regulate many of the capital insurance companies that regulate as well as a board knows they revised their outlook for Blue Cross Blue Shield's long-term issue of credit rating from stable to negative they talked about the fact that they had sharp underwriting losses and that there has been pressure on the company's performance in the last four years and some of that I think they use the word primarily some of that is that they should be able to the rate process and not receiving out of their rates over the past four years so that's something else certainly that we take into account is the independent rating agencies that migrate our companies as well and that certainly gives us a pause for concern further the department also conceptualized some different ways on page 4 of our solvency opinion you'll see a table that we created in last year's opinion we updated it for this year as well this illustrates Blue Cross Blue Shield's net premiums are earned so these are the premiums not the businesses that self-insure but the premiums that are earned that has grown 10% since 2014 while their surplus has declined over 20% during that same period while their membership has remained really flat all that means that Blue Cross Blue Shield's risk exposure has increased while over the last five years it's corresponding surplus safety net has significantly decreased so there's more risk and less safety net putting the company at further risk other companies that we regulate that we looked at the last five years have seen similar premium revenue increases of approximately 36% but during that same time period their surplus has kept up by increasing by approximately 38% so Blue Cross stands alone as we look at some of the imperative companies that we regulate as well so I think the board again also knows that the new RBC range order that we filed earlier this year requires Blue Cross Blue Shield to promptly file a department plan to move back within its range if they ever do fall out of it as I mentioned at the end of 2018 Blue Cross RBC sat at $4.95 considerably outside of its actually reviewed and improved range they have submitted a plan to the department that calls for $17.9 million of 2019 ANT refunds to go toward surplus which will boost its RBC by approximately 78 points similarly in 2020 the ATM refund of 8.7 million will go toward surplus increasing it by an additional 26% points so Blue Cross submitted to the department would revise the four-year downward trend in RBC would move the company into its approved target RBC range and would move it closer to its comparative companies across the country I do this and the department views this as a unique opportunity to get Blue Cross Blue Shield trending in the right direction and safely back within its range without dramatically or really increasing at all its contributions to reserves that are normally filed I would note that it's estimated a 7% contribution to reserve would be necessary to reflect the same impact that these alternative minimum tax credits would have so I really do mention this as a unique opportunity all the things that we've said are true in terms of the trending and some of the other solvency analyses that we do that give us some positive concern but there is a unique opportunity to really shift the company in a positive trajectory from an RBC perspective from a solvency perspective from a surplus perspective I do urge the board to take advantage of that so in conclusion the department does not expect a proposed rate that will have a significant impact on our overall solvency assessment however the department does caution the board that any downward adjustments to the violence rate components that are not actually really supported would continue to reduce Blue Cross's surplus and continue to negatively impact its solvency considering the circumstance is abstract above it's our opinion and our solvency letter that any departure from the rate finally should be made with great caution so with that I'm happy to take any questions thank you questions for the questioner questions for the questioner you were nice enough to come over here and talk about your solvency opinion I've got a couple questions about your solvency opinion I'd like to ask you about some other things too if you're prepared if you're not that I won't together to but I would you want to answer a couple of questions about your primitive practice order that you put out on February 23rd, 2018 sure so is it does the witness have I think the binders to your left would be right there that would be exactly 23 binder 2 smaller just to confuse everything you brought you happen to bring that with you great okay so in that order you crossed to not admit the entire entity refund amount that is getting under the Trump tax bill correct that's correct in that order of this order you know the infant tax recoverables like those entity refunds that are generally considered a new asset on the rest of that number one along right yeah those that are expected to be recovered within the next calendar year those that are expected to be recovered within the next calendar year correct okay and so we're now in 2019 and so the amount of those refunds are expected to be recovered in the next calendar year far more than 19.9 million for this year and then the additional rates yeah I think it's 17.9 but the point I think that you're making is are these amounts showing up on their financials I think the broader point just to cut to the chase is that they have submitted a plan they'd be in Blue Cross Blue Shield to the department that shows they anticipate using the alternative tax refunds to fund to go to their surplus once received that's part of their plan to get back within their range I think they've been transparent also in their financial statements the first footnote to their financial statements mentions this permitted practice and the fact that it has been issued by the department so you know at this point you know I think that's all been very done in a straightforward transparent way and I think the board and others understand the position of Blue Cross Blue Shield and what they intend to do with those are alternative and low tax refunds is it okay when you run with your own standard the standard which you set out in paragraph 3 where that these tax recoverables recoverable tip would relate to amounts expected to be recovered in the next calendar year that you should based on that standard there is no basis to not admit the amount this year this calendar year or the following year what is the standard whether it's under a slap number one or one or anything else what standard authorizes a non-admission tax recoverable and in this case Blue Cross knows it's payable and has announced it's payable in a couple of months and clearly next year there are also there is nothing that's going to happen to prevent the payment of this money this year and next year and given that shouldn't this be an admitted asset that is now part of the surplus so to answer your question first this is a five year calendar year so it's going to be five payments under this payment refund so that's why we issued the permitted practices so this is a five year refund so there's going to be five years in which there's going to be taxes owed to Blue Cross Blue Shield we hope that those payments continue to come that there are no changes in federal policy that impact them certainly even with the 2019 payment when those are going to be collected whether it's going to be calendar year 19 whether it's going to be in early 2020 so certainly with the 2020 payment that might not be received until well over a year from now if not longer than that so the way that we approach this was to say that they would be admitted assets once they received the refunds once they could go to the bank and take the refunds and pay claims and pay operational expenses for Blue Cross Blue Shield that's a good understanding that's sort of why do you agree that they would all be admitted now correct I think that's correct at least the payments in the current years okay and Blue Cross itself you know that implies that you put out this order last year February of last year but Blue Cross itself is now saying that we're getting the money in October of this year would you assume that your order was reasonable when issued would you agree that now that Blue Cross knows it's getting the money in October of this year that at least the first 19.9 should not be nominated so you know I think again I'll go back to the statement I made that they've already transparent with us about what they plan to deal with fellows and monies so we anticipate that going into surplus whether they're admitted or not admitted at this point I think is somewhat decided at the point we're confident that that 17.9 million is going to go to surplus that's a plan they filed with our department whether they're admitted or not it's not too much of a concern for us well it is not decided the point though is if the absence of that $19.9 million makes a difference between the RBC ratio of $575 or so I think that's correct and that's why in my testimony I said what the anticipated RBC impact would be to those monies flowing to the surplus so that I think is important for the board to know if that's going to be the impact I think Blue Cross included in their violence as well so again just to reiterate that's going to be a significant impact of somewhere around 78% for this year on about 36% for next year it's well known to those that are making the decisions you mentioned with your solvency you considered various risk factors did you also consider factors that new papers for example did you consider the fact that Blue Cross's reserving practices according to both the Air Consultant Action and your own agreement were also conserved well I don't think they used the word ultra-conservative I think they used the word conservative and I talked to our actuary about that a particular point that he said even though it was conservative it was still reasonable so that I remember having a conversation with them before the order was issued so that simply the fact that they were conserved on that point simply meant that there wasn't going to be an adjustment of risk factor could you turn to exhibit 17 please can you turn to page 14 of the absolute report which is page 38 of exhibit 17 yes can you read the first four paragraphs on that page you came up with based on could you say that one more time to page page I'm sorry page 17 which is page 14 of the actuary report 38 38 38 the red type it gets very confusing care management effectiveness just above that I think yes the paragraph can you see that based on the last I'm sorry the last sentence before that based on the sense that AHB consultants AHB consultants will leave that in the process it's explicit level provisions for adverse deviations which result in both higher surplus level and higher HRBC earlier they took that under advisement and did just that so I agree with understanding that Blue Cross effectuated it I can't speak to it because I didn't repair that report but it sounds like a reasonable remediation it sounds like one that was taken into account and acted on the fact that Blue Cross has this 15% provision for adverse deviation Blue Cross is our consultant who that it could potentially lower that and if it did so that would result in both a higher surplus level and a higher HRBC level and all I'm asking you is do you agree or disagree with that statement well you know it sounds like a reasonable recommendation there's a lot of things that can be done to inflate potentially an RBC ratio so they said that a company can do a lot of things to impact its RBC ratio to impact its RBC ratio yeah I said that's late but impact to make it go up so those aren't the wisest things to do is my point but this sounds like a reasonable recommendation and again one that it sounds like Blue Cross was still active and we agree on that Vermont is not a hyper competitive environment well we're fortunate I heard earlier that there are some states that want a one tier area so the fact that we have two is we're not hyper competitive they're pretty competitive each other but yeah alright could you turn back to exhibit 17 please go to page 10 we have all of the one report which is page 15 of the exhibit you go to the fourth what about the starting of competitive environment yep can you read that please so as a competitive environment considered to the threat of a new entering into the Vermont marketplace vaccine did not include an additional charge for competitive environment risk so in that case they don't anticipate new carriers and entering the space so you know how all of the one that came up with this calculation in the bullet right above that the same regulatory environment that's obviously sorry it's a target should be increased by 73% because of the regulatory environment do you know how that came up with that 73 numbers there's all the wind and wind on terminations that were made by the trust of the children so I can't talk about how they came up with that probably because I've got all the wind in it as well but yeah and in developing your salency opinion did you also consider look across the statutory duty to ensure the subscriber benefits are provided at minimum cost under efficient and economical management so yes whenever we review filing those long term care filing a worker compensation filing our department balances considerations like those against considerations about pricing affordability availability of products so that's something that we'd consider when reviewing a filing or reviewing operations of a company thank you very much thank you thank you questions from the board I think I'm going to pass for now many have a follow up but I'm going to let other people have more time I just want to as a consumer focused agency in New York I'm sure you recognize the tension particularly the more basic tension that exists between the need for consumer projection with concerns associated with the importality of rising premiums that is effectively the tension in the mid-days and as we've heard today as these blue-crossed official premiums rise relative to competitors we've heard that some of them will fall average health risk rises and as a result of that blue-crossed you can hire administrative costs per capita and the fact that their average health risk goes up means that their average planned experience is going to grow it's not going to be mitigated by this transfer that of course is going to affect solvency but the solution to that is ever rising premiums to cover the higher administration costs and the higher risk CTRs to cover this so my question to you is there's going to be a cycle here that I'm concerned about how does the current competitive position of blue-crossed shields in this community market affect your assessment of blue-crossed shields ability to reach the target range of the RBC that is set for the newer quarter what are the CTRs that are going to be expected to achieve that target range given the competitive position of blue-crossed shields the one point I'll make versus that as members believe of a company in the state blue-crossed shield all else being equal you're likely to see their RBC score go up because there's sort of the same amount of reserve they're sitting down to circle as I should say but there's less lives to be covered so you can actually see their RBC go up but certainly then there becomes a question at some point about scaling like how big does a company need to be to achieve scaling that's necessary to ensure that its administrative costs aren't too high so the percentage of premium and that they're getting the right types of agreements and contracts in place to your point so in terms of contributions to reserves I mean blue-crossed shields for a long time has had a 2% contribution reserve revised down to 1.5% after the federal tax went away and that is something that we find to be reasonable that the department can agree with that if that 1.5% is funded here in the year out that might not be needed fully there might be sometimes where a much higher contribution reserve might be needed but if that is consistently provided for then the circle should be an arrange that you know it sounds in this particular instance the contribution to reserves wouldn't help it to catch up to the degree that it needs to because you would need something like a 7% contribution to reserve to get it closer to that new RBC range but for the alternative minimum tax rate funds so again that's a unique opportunity to get it within its range and the caribou does fund that contribution to reserve and of course in front of the contribution to reserve there's some other areas that are not actually supported you know it's the same as cutting to that component so there's something to be mindful of all the way around in the rate line but if they're getting that to their baseline they should be in a sound financial position regardless of the potential you know the competitive environment so let me just follow up quickly you mentioned that the RBCs needs will be lower if they have their numbers so does that mean that if they're going to always continue to decline there should be a new target range there's certain factors that can impact the company that the range needs to be examined and that's something worth looking at now I think you might find also that some of the higher risk potentially individuals would respect staying with the Blue Cross Blue Shield company so that might cut against I think those that are staying the higher risk so in fact I'm worried that they may need to be like it is higher resorting is going to get just going to fuel that cycle so I'm just trying to figure out where this ends yeah well I think and unfortunately I don't think the answer is in the rate process I think the answer is really that we're not careful of staying outside of that and that of Blue Cross and other Vermont stakeholders and that part as well I think that's probably where the answer lies not so much in the rate final process but certainly but certainly those efforts will be timely if Blue Cross Blue Shield even in the short term doesn't have the capital that it needs to have sufficient reserves make investments in technology and processes and people in those innovations Thank you Hi I just want to go through some of the RBC populations and some of the discussions I agree that they're at 495 right now but looking at what the biggest impact has been over the past five years Could you mention what that is? So if you look at our policy and opinion we have our outside actual alignment here in our financial analysis and on page three at the very board you've seen the last five years and certainly opinion has underwriting in Boston games for the last three years and certainly not all of those years that they have lost because other things in terms of investments they've picked up the slack but that's certainly something that catches my eye When I look through it I actually see a little differently over the past five years the underwriting loss has been 20 million loss and the net investment game has been plus 35 so there's actually been about a 15 million contribution for those two categories The biggest change that I see that's gone on is prior to a couple years ago they had these admitted assets in their service so the past two years they've taken those out and that was based on the chart if you look down on exhibit 21 page six in book one so what I do is if I did a bridge this one would just retreat so if I did a bridge from the 590 that you were in 2016 to the 445 which so exhibit exhibit 21 page six is it there or isn't there a package there sorry sorry it's your final statement oh here you go in the second book exhibit 21 page six and we could go back and do it based on time but if you look at these these two years the level of the fund has been the change in unrivaled gaming and about to wash the change in net deferred income tax and the change in non-admitted assets has been a 24 million change 17 million dollars in 2017 7 million in 2018 that combines for 110 RBC points so that's really what's driven the biggest change it used to be in their numbers now as you say we have this unique opportunity that it's going to come back but if it was there now it's going to come back which is great but I think the point we're missing is that over the past five years far enough it hasn't been a lot of change the other negative is if you go down you know their games are lost on surplus it used to be their pension being down so I just want to make sure we're realizing that you know there's been a lot of focus that what the Greenland Care Board has done has judgmentally impacted their RBCs what put them into a 25 and respectfully I don't agree with that I would say those assets used to be in their numbers they're now out of their numbers they're going to come back in their rooms so in 2017 the tax cut passed in December of 17 I think in Blue Cross we should have paid in a federal alternative minimum tax for corporations not for individuals that was a big deal that was shown in the 80s and Blue Cross certainly would tell you more about that that were never expected to come back to Blue Cross because they're non-profit it just so happened that because that alternative minimum tax for corporations went away that they got these tax credits so they wouldn't have been on their financials prior to 2017 rather because they never would have been anticipated getting those deferred tax things back due to their non-profit status because the alternative minimum tax went away that's what they all did and it asked us to come on to their balance sheet back in 2018 but for our February 2018 order that said when they filed with us in March of that year that they could treat them as non-invent assets and again the reason we did that was not to deflate or to mess with our RBC's flow but simply we thought it would be misrepresenting if they did it the other way because they didn't have that money in the bank they didn't have that money to go get and pay claims with so we thought it was a more appropriate way to go back so just to treat them as non-inventive I should say I don't care what I'm just saying if I look at what's happened if you look at this what changed in RBC over the past two years the biggest driver was those two lines and the actual operations were about great even and the operations over five years actually were favorable so we are over an hour at 4.95 we're going to get back up again and out that's what's created a lot of noise in the RBC and we would have been quite a bit higher had those been in there on top of that there are small adjustments at the $7 million that they're supposed to get back from risk that's 30 so that brings them from 4.95 to up again by 30 the CSR adjustment that they can get back so I just wanted to really point that out of the documentation really points just to what the Green Money Care Board has done as far as rates and when I look at net operating from the loss that you do expect to have some gains on your portfolio that should offset and help you in your RBC those have been washed over the past five years I just wanted to get at that point just another topic on ACL risk and right now the ACL in Vermont is holding about estimating the potential overall risk of $4 million very small amount for commercial about $3 million most students in Medicare but the hospitals are now taking on that risk and that shift over time should be being 100% in there's very small in the RBC range for the cross relative to that just want to get your perspective on where the risks should reside when we had a fully populated ACL and if in fact 3% of a risk of up to 6% 50% was going to be borne by the ACL on commercial how would that impact the risk doesn't disappear right and gets shifted to some degree you want to think about what are ways to measure the risks that might be residing in new places that we haven't thought about or measured in ways in the past and coming up with something that I think was university agreed to as a solid indication of you know I would say solvency or ability to pay ability to manage that risk coming up with a new way probably critical as this continues to go forward and just one last thing you talked about not adjusting rates if they're not actually supported and would you support that what now is put forward is actually supported yeah so we did a somewhat unusual in the sense that we don't actually get involved in the rate process in general because of the rate that was requested being high and higher as high as I would be a commissioner and also not to see the lowest point since I've been a commissioner we did ask both looking at financial status on top of our analysis and also to take a look at the rates as it relates to the two major points in this agreement I think are actually set on the individual mandate that they had seen more conservative I guess you would call it lines that included a number that was included in Blue Cross Blue Shields so she and Alderwein it was not an actual opinion I don't want to say that she gave a natural opinion but this was her thoughts on the filing that she agreed with Blue Cross Blue Shields perspective as it relates to the trend they said that there was some room of reasonableness there so they saw that as a range so I will just caution there just to mention that when you do have a range to consider whether you want to take a little into the range every time considering the financial status of the company there might very well be times where you want to do that to balance the credibility but there's also probably times where you want to be cautious of that because where a company might reside in their overall financial status thank you no questions I do so the opinion that you just gave is not your actuaries that's correct and in terms of risks and reserves would you agree with the statement that reserves should reside appropriate to the risk taken on by whichever party I believe that's correct yes thank you thanks Mike thank you thank you thank you very very well the public waiting for us and we are going to be conducted so hope for the hope for the hope for the hope for the hope for the hope for the hope for the that affordability concerns, so we're not going to jump into that. And I think we all know, and the remonters know, that what it means. I think, you know, I don't believe there's a remonter who would say that affordability means some kind of measure of what MLR means, or that affordability means something that's within the parameters of an actuarial amount, so that affordability, is a measure of consumers' experience. I don't know if you're going to do this debate about what is the appropriate foundation, what comes first, whether affordability comes first, or an actuarial analysis. Predictably, the actuarial will say, hey, you got me actuarials, actuarially sound first. And predictably, the health care advocate is going to say, hey, affordability is a primary concern. I don't know what's first, both are important. 400 commenters have commented. Over 400 commenters have commented. And that's an impressive number. And I was going to go into a little detail there, but I'll just get it back. Blue Cross told us today that any reduction in the rate on non-actuarial grounds will cut things through reserves, or won't reduce the cost of care. In a few weeks, you're going to hear from hospitals who are going to make a similar kind of argument from their side that you can't possibly put down your pressure on their business because of their own pressures. So, I end up with, it's just very basic, with both of those things hand-in-true. There has to be an ability for you, the board, to put downward pressure on this health care finding system. Otherwise, I guess we should all just go home, if they don't believe, and believe that there is something we can do. Just a very quick review of a few things. Higher rates lead to more people being forced into higher out-of-pocket plans. The underinsured rate is growing, when from 27% in 2014 to 40% in 2018. Out-of-pocket quitting the household health insurance survey from last year, out-of-pocket costs for the underinsured volunteers was an average of $4,072. And 18% of those people were contacted by a collection agency. It's real. It's real and it's impacting people's ability to get the care they need. I don't want to offend the board, but I don't want to speak to the urgency of it. From my perspective and what I think we're hearing from consumers. From my perspective, a crisis that's happening for rough animals when they need care and can't afford it is like the urgency of a community hospital going bankrupt. And I know really important things have happened in the last couple months around Springfield. Appropriate things, injections of cash, a lot of meetings and probably a lot more than I know about have happened. And those are the right things to do to save a community hospital that's in trouble. I just want to say that we have a very similar crisis that's happening in a much more private way. Remarkers are proud, people are proud. They don't want to speak out about it, that's going on for their financial crisis. They don't want to talk about it, but it's impacting the ability of people to get the care they need. And thank you board for taking on this task of balancing these two really, really big pressures. Questions for board? See you in that room? Yeah. So skip the closings, but reasonable or should I get them in the closings? We have them. We have them till 4.15. What's that? We have them till 4.15. But they should be allowed to make a closing. Yeah. Yeah. How about it? How about the two minutes? Is that perfect? Two minutes? Two minutes? Okay. Okay. So I'll just go back to the beginning of this here. I'll correct. It suggests that a thing would be over leeching. And I want to respond to that directly and just say that based on the evidence that we've heard, there's no, there is no over leeching in this request. Lucrosse has no incentive to over leech as we've heard that there are not conflict with admission to serve our honors, and they have every competitive incentive in the marketplace to make their rates as low as possible. And the testimony that we've heard about their administrative costs, about the essential needs for a CTR competition and given their solvency and the actuarial building of the rates makes it very clear there is no padding in this rate request. There's some disagreement among the actuaries, but I'll leave this point brief. As the commissioner indicated on the trend piece, it's a range. There's a reasonable blue-blue process proposal. It's reasonable. It's within the range. And given this policy concerns under the circumstances here, given the evidence about the uptick in utilization, this is a very risky time to go to the low end of the range. There are two overarching points that I think we want to close the hearing on. One is, as we, as, has come through the witnesses, that premiums have to be funded to pay for the cost of health care. There's no padding in the rates. The cut to those does not make health care cost less. It does not make health care more affordable. It just under funds the premium. It puts the solvency of the insurer at risk and puts strain on the system. Underfunding the rates is not the way to reduce the cost of health care. As we heard from Mr. Garland, fully funding the rates supports the ACM, which is the payment reform effort that's going to show results down the road. And the other overarching point is the solvency is a critical issue. It's the most important element of consumer protection. And if the rates are underfunded, then it's going to put further strain on who crosses reserves, and it's going to threaten your solvency, which will ultimately threaten those factors that the board must consider, access to care, access to quality care, and ultimately for agility. That was probably pretty close to the minutes I was trying to do the same. Well, why are our premiums going through all the natural variation, but the premium issue, honestly, to me and I think the most to many people is the whole issue of the tax refunds. Wood Cross, understandably, wants to use that money to build up a surplus. Surplus in Vermont, of the Wood Cross plan, has traditionally been one of the worst in the country. It always has. And they see, and I see from their perspective, a unique opportunity to take this step, this windfall, and to build up their surplus. From the commissioners perspective, I also see hip-hop from the richest side. I also see history perspective. The worst that I was commissioning in 30 or 36 years, the worst thing that could happen to a commissioner is to have a company go bankrupt, go and solve it under your watch. If you think about the pay rates, pay high rates, you get a lot of complaints, but it's not catastrophic. A company goes and solves it, it's a commission personal, is the one who feels it. So I get from history perspective, I don't think there's a realistic chance of that happening in Vermont and for obviously the reason it's discussed here. I do think that, as I said originally, Wood Cross overreaches in trying to blame the railways, the second step back, blame work, if you like, for what's happened to its surplus. There are 900 reasons that its surplus has declined. This year, for example, 10 million bucks was due to their losses in the stock market. If you question whether they should have had that much in stock and if they did have that much in stock, why didn't they lose 10 million? But no, there was 6 million on their insurance business, but there was 10 million in the stock market. So they can't blame the great racists for what's happened to their surplus to the extent that they're trying to. For me, the title of it was this. If this were an understatement where the standard was excessively inadequate and unfairly discriminatory, I might have more significant Wood Crosses and arguments than in this state where they have to consider affordability. And we all have to have maximum solvency, but they can't have maximum solvency if they've got to consider affordability. So I asked the board to err on the side of within the rules and I think the red is as horrible as possible. There were some questions at the board access that required some formal review for us. We will try and get those to you in writing so they're clear with the date for a response. In addition, I think there will likely be some questions from Elean on those two points of disagreement on the actuarial piece. So anything else before we adjourn?