 Well, good morning. I'll call to order the Green Mountain Care Boards meeting of July 19th, 2023. Thank you all for being here today. We have a rate review hearing for Blue Cross Blue Shield, small and individual group products. I'm going to appoint Mike Barber, our general counsel as the hearing officer for today. I want to thank the office of the Green Mountain Care Board and the staff for coordinating everything. It's really remarkable that. Within a week of the floods and entire loss of our office, this is our 3rd hearing. We had a 9 hour hearing Monday and I presume today will be fairly long too. So huge kudos to. Tyler and Kristen and Gene and Susan for making this all possible so that the work goes on and for the staff for persevering and doing it also. Hope everyone's okay and a huge thanks to everyone here and everyone else who's working to help the community on this. And I'll turn it over to the real quick, Tom Walsh, member Walsh. Will not be able to attend today. He will review the transcript, I presume, and the hearing and he may participate in deliberations if he does so and with that, I'll turn it over to the hearing officer. Thank you, Mr. Chair. So good morning, everyone. Again, my name is Michael Barber. As you heard, I'll be the hearing officer for today's hearing. The purpose of the hearing, as Chair Foster said, is to take evidence and argument on Blue Cross, Blue Shield of Vermont's 2024 individual and small group rate filings. The docket number for the individual rate filing is GMCB-002-23RR. And the docket number for the small group rate filing is GMCB-004-23RR. The hearing is being held pursuant to Title VIII, Section 4062 of the Vermont Statutes Annotated, as well as Section 2.307 of the Green Mountain Care Board's Rate Review Rule. Representing Blue Cross today are Michael D'Onofrio in Bridget A.C. from the law firm Strisson Mayor, LLP. Representing the interests of health insurance consumers are Charles Becker and Eric Schulteis from the Office of the Healthcare Advocate. I also wanted to recognize the board's attorney, Laura Belevo, who will be leading the direct testimony of the board's contract actuaries at Lewis and Ellis and who may also have questions for other witnesses. Just want to continue what was going on before the hearing began, which was testing some audio. So because we're holding the hearing remotely, you just need to make sure people can hear and be heard. And so I'm just going to do a roll call of people. And if you can, when I call your name, if you could just take yourself off of mute and confirm that you can hear. So we already heard from Chair Foster, board member Holmes. Yes, I'm here. Is my camera on? Yes. Okay. Thank you. And board member Merman. Yes, I'm here. Ms. Belevo. Yes, good morning. Hi, good morning. Ms. A.C.? Yes, good morning. Good morning. Mr. Donafio. Good morning, Mr. Barber. Good morning. You're a little quiet, but I can hear you fine. Mr. Schulteis. Yes. Here. Here. Mr. Becker. Hello. Good morning. Good morning. And Ms. Holland, can you hear everyone? Okay. Yes. Thank you so much. You're an officer. Martine. Good morning. Good morning. Okay. I think that is good enough for now. We are recording today's hearing. As you heard, we also have a court reporter here to transcribe the proceedings. We will provide the parties with a copy of the transcript as soon as we receive it. Are any members of the public who are present today? We will be taking public comment at the close of the proceedings, which will be later in the afternoon at a time, which I can't say with certainty. So if you don't want to sit through a long day of witness testimony, we are having a meeting on Monday, July 24th from 430 to 530 in the afternoon that will be dedicated exclusively to hearing from the public on Blue Cross, Blue Shields filings, as well as MVP's filings in the individual and small group markets. Information about how to participate in that meeting can be found by going to the Green Mountain Care Board's website and clicking on the link for 2023 board meeting information. I just want to spend a couple of minutes on binders. We received evidence binders on July 13th. The binders contained an exhibit list that listed 25 exhibits. Exhibit 23, however, was a list of 18 exhibits from the healthcare advocate. That list contained hyperlinks to public data sources on July 18th. The Office of the Healthcare Advocate submitted the 18 documents listed in that exhibit list, which are labeled HCA-01 through HCA-18. Those exhibits were distributed to the board and the witnesses via email. And so the binders, as they stand now, should contain a total of 42 stipulated exhibits, 18 of which are included in exhibit 23 and labeled, like I said, HCA-01 through HCA-18. Does anybody have any questions about that? Okay, does either party have any objection to me admitting those exhibits and evidence at this time? We don't object either. And please consider that done. And for the record, my understanding is that exhibit HCA-11 may be replaced at a later date after new information is released from the source. So I just wanted to say that on the record. Yesterday, July 18th, at the board's request, Blue Cross prepared an additional document. I think I'll wait on that document until probably Miss, probably Martine's testimony. But I just wanted to note that for the record, too, that was distributed to the board and the parties yesterday afternoon. And thank you for preparing that on short notice. Just before we move to opening statements, I wanted to say a few things about... Well, first, I wanted to give a thank you to the parties also for being ready to go today. I know you were all impacted by flooding and just big thanks for being prepared because these are very time limited proceedings. So on the issue of time management, we scheduled this hearing for 8 in the morning, 5 in the afternoon. Board Member Merman has to leave by 4.30. I don't expect we'll be done by 4.30. And if we aren't, then he will have to watch the end of the recording, the end of the hearing. We did have a hearing on Monday on MVP's individual and small group rate filings. It went a little bit past 5 based on past experience. I'm a little concerned about 5 o'clock today. So obviously the parties need an opportunity to present their best case, and the board needs an opportunity to ask the questions it has. But I just want to urge everyone here at the outset to just be mindful of the time and try to be efficient. So, does either party have anything they would like to discuss before we move to opening statements? Mr. Danafio. Mr. Hearing Officer, just on that efficiency point, I just want to remind everyone, we have three witnesses on tap for today. Martine Brisson-Lamieux will be up first and she'll be addressing kind of the actuarial side of the issues before you. She'll be followed by Ruth Green, who will be able to speak to kind of the financial side, administrative charges, contribution to reserve, reserve positions, those sorts of issues. And then Dr. Tom Weigel, the Chief Medical Officer, is also lined up as a witness today to speak to issues around provider contracting, quality, prior off, that sort of thing. So you will likely hear our witnesses, particularly during board questions, defer to one another, and that's not in any way an effort to be evasive. It's just an effort to be efficient and not have, you know, not have you listen to testimony on the same topic from several different people when, you know, there's kind of one person, you know, prepared to be the witness on that topic. If that makes sense. Yeah, thank you for that, Michael. That's a good thing to say up front. So, would Blue Cross like to make an opening statement at this time? Yes, please. Good morning, everyone. Good morning, Chair Foster. Good morning to the board members and hearing Officer Barber. My colleagues over at the HCA and all my colleagues here at Blue Cross. I'm Mike DiNoprio with my colleague Bridget A.C. from Strisson Mahler will be representing Blue Cross Vermont today. So let me start with the elephant in the room. As you know, Blue Cross is asking for a sizable increase in these markets this year on the order of 17 and a half to 18%. Blue Cross, of course, would far prefer to be here before you asking for a very small increase or for better yet no increase at all. But it's our duty to develop and propose rates in these markets that will ensure Blue Cross's ability to pay the 2024 health care cost of its members. Blue Cross does not take this duty lightly and it doesn't take the impact that this duty has on the people it serves lightly at all, including the people in this room. So we take very seriously the inherent difficulty in your job, board members. You have to balance a group of interrelated statutory factors including whether the rates are affordable, promote high quality care and promote access to that care. You also have to make sure that the rates are not excessive and that they're adequate from an actuarial standpoint and that they protect the solvency of the insurer. Now, I wish I could point you to an easy path forward, but I can't. We understand the impulse to look for ways to reduce rate requests, the rate requests before you today. And we hear the voices of Vermonters and small businesses who already struggle to pay their premiums. But the evidence shows that there is nowhere to cut the rates before you and I want to quickly walk through the would-be options. So first, there's no credible evidence for cutting Blue Cross's projected 2024 medical and drug costs. Those cost projections make up the vast majority, about 90% of the proposed rates in front of you. So that means about 90 cents of every proposed premium dollar goes directly to cover Blue Cross's members' health care and thereby support and pay providers including our local hospitals, medical centers, primary care practices, etc. Now, Lewis and Ellis, your contracted actuary, analyzed the rate development in both markets and found it to be reasonable. They recommended only three changes, all of which we agree with and none of which really quarreled with the way the rates were developed. So as a result, cutting this portion of the rates, which like I said makes up the lion's share, by, for instance, requiring Blue Cross to reduce some assumption that it made in developing the rates can't be justified from an actuarial standpoint and would likely render the rates insufficient to cover the 2024 health care costs of Blue Cross's members. So that leaves Blue Cross's administrative costs and its proposed contribution to member reserves, but there's no justification for cutting those aspects of the rate either. In terms of administrative costs, to use Lewis and Ellis's words from their two reports, Blue Cross, quote, has atypically low administrative costs despite not being a very large health plan. It therefore appears that Blue Cross manages and limits administrative costs better than the typical health plan nationally. And Blue Cross needs those modest requested administrative costs in order to process claims, service its members, service providers, and meet its regulatory obligations. Finally, Blue Cross's requested contribution to reserves of 3% is necessary to leave in place to preserve the company's solvency, to protect its solvency. As L&E and the Department of Financial Regulation both point out, Blue Cross's RBC, its risk-based capital, and you'll hear more about that later, has declined significantly and is currently well below the range ordered by DFR. L&E notes that the 3% proposed contribution to reserves, though larger than the 1.5% of prior years, falls near the national median and is reasonable. So given Blue Cross's current RBC position, cutting the proposed CTR would imperil and not protect its solvency, which as DFR explains is a foundational element of consumer protection. Now, we expect that affordability will be a focus and a recurring theme today, and we understand that. On a gut level, how can something that is already expensive go up 17% to 18% and be deemed affordable? I want to offer a few thoughts before I close that I hope will help you in your deliberations in this regard. First, affordability is not defined anywhere, not in statute, not in rule, and therefore has many possible meanings, and I think it depends on the perspective you're considering. Affordable in what sense, affordable for whom, that type of thing. Every Vermonter faces some level of risk of sustaining an injury, an illness, somehow facing unexpected health care costs and an unexpected health care bill beyond our ability to pay. In exchange for these premiums, Blue Cross assumes the risk of covering those otherwise unattainable costs and thereby makes those otherwise unattainable costs attainable for Vermonters. Second, in assessing affordability from the consumer perspective, you cannot omit the impact of the federal subsidies. Those subsidies take the actual amounts that thousands of eligible Vermonters must spend on their premiums from their own pockets and brings them within reach based on their income. Third, affordability is one leg of a three-legged stool, as I believe Chair Foster alluded to during Monday's hearing, along with quality and access. Now, reducing the rates in an attempt to make them more affordable risks toppling that stool by hampering Blue Cross's ability to promote quality and promote access to the care Vermonters need and deserve. And finally, these rates don't exist in a vacuum. They're part of a complicated, expensive, and interconnected system. The vast majority of the proposed rates reflect the best projection that we, and I really mean all of us here at this moment in time, have for the health care costs that Blue Cross's members will face in 2024. Those costs are not increasing because of anything that Blue Cross does or doesn't do. They're increasing because the costs of medical goods and services are increasing, and they're increasing because our members need for an actual uptake of health care is increasing. So if you reduce the proposed rates, but those underlying elements grow as projected, and as the evidence strongly supports they will, Blue Cross will sustain another loss in this market at a time when its solvency position needs to be prospectively maintained and not taxed. Therefore, we respectfully request that you approve the proposed rates, which will allow Blue Cross to continue to work with you and all relevant stakeholders across the health care system to try to make the system more sustainable. I want to thank you very much for your time. Thank you in advance for you and your entire team's energy and attention, especially in the face of the challenges we're all dealing with right now, and we look forward to today's conversation. Thank you. Opening statement from the health care advocate. Yes, thank you. Hello. Good morning. Hearing officer Barber, members of the board, representatives of Blue Cross. My name is Charles Becker. I'm a staff attorney representing the office of the health care advocate and Vermont health care consumers. At issue today are proposed rate increases averaging 18% in the individual market and 17.5% in the small group market after all recommended and agreed to adjustments since the rate filing are accounted for. These proposed increases come just one year after approved increases of 11.4% in the individual market and 11.7% in the small group market and that were thought of at the time as painfully high. If these 2024 rates are approved, then the cost of simply purchasing health insurance, never mind the cost of actually obtaining care, but simply the price of being insured will have gone up by nearly 30% in just two years. We're all acutely aware that we've been living through a period of high inflation, but the rate increases in health insurance are far exceeding the pace of ordinary inflation. For regular Vermonters, the cost of health insurance was already verging on unaffordable. With these increases, will we finally cross that line and drive people out of the market? As filed, the 2024 Blue Cross Blue Shield Standard Silver Plant would cost roughly $1,000 a month for a single person, $2,000 a month for a couple, and nearly $3,000 a month for a family, for silver. Can we really say such rates are affordable? It's true for now that in the individual market, a person can purchase the benchmark silver plan for no more than 8.5% of their income, but those enhanced subsidies have an expiration date that's only two years down the road. Approving these rates risks creating a catastrophic affordability crisis on the near horizon with absolutely no guarantee that Congress will act to prevent it. And what about the people in the small group market? The small businesses, the nonprofits, the municipal governments, and their employees? There are no protections against unaffordable rates in the small group market. And while prices are a little lower in the small group market, at about $750 a month for that single silver plan going up to $2,200 a month for a family, again there are no subsidies for these folks. So for that silver plan for a family, that's $26,000 a year. $26,000 is more than one quarter the median income per household of three, just for premiums. Of course, most people with small group plans will share this cost burden with their employers, forcing their employers to make fraught decisions to absorb those costs to the detriment of their bottom lines, to increase the prices for their goods or services, to raise taxes, or when the employer can't possibly pay more and still balance the books to pass a greater share of the burden onto their employees. You're going to hear from Blue Cross that the rates are actuarially justified, that they are not excessive and also not inadequate, that they need every penny to pay claims, pay overhead, and make a modest contribution to reserves. You're going to hear from your actuary, L&E, that they pretty much agree across the board with Blue Cross that Blue Cross's assumptions are reasonable and appropriate. You're going to hear that the primary reasons for these high-rate increases are hospital spending, which did not level off as we had all had hoped and anticipated, and prescription drugs spending, especially high-cost, low-utilization specialty drugs. You're also going to hear from DFR that you should not cut these rates in any way that is not actuarially supported. But as you know, for better or for worse, whether the rates are actuarially supported is only one factor that you must consider and balance. Among the other factors you must consider and balance, including promoting access and quality, there's affordability. The carrier bears the burden to justify the rates, and the only rates that can be justified are rates that are affordable. Yet I anticipate you will hear various ambiguous arguments from Blue Cross about the affordability of the rates. In the pre-filed testimony, for example, they assert with a simple yes that the rates are affordable. In live testimony today, we might hear that the rates are affordable, at least relative to the benefits they provide, or that payment of the premiums is itself proof that the rates are affordable. But you're not likely to hear Blue Cross describe the impact these rate increases will have on the roughly 40,000 Vermonters who purchased their policies. We've heard from many of these Vermonters through public comment, and nearly all of the comments received speak to the rates being unaffordable. That Vermonters of all stripes are experiencing significant stress over the high cost of insurance, let alone health care, and that Vermonters are worried how they will squeeze an additional $10 a month, $100 a month, $1,000 a month to pay for their health insurance. Whatever their means, Vermonters are stretched thin financially and they can't afford to pay more for health insurance. With that in mind, as we proceed through this hearing today, I urge you members of the board to please be looking for any opportunity to cut these rates. I will endeavor to point out at least a few ways that I believe the rates could be cut in order to make them more affordable and to ease the affordability crisis for monitors or experiencing for health insurance. Thank you very much. Thank you, Mr. Becker. So, Blue Cross, are you ready to call your first witness? Yes, thank you. I'd like to call Martine Brisson Lemieux. And is everybody ready? Can everybody hear? Okay, thank you. Good morning, Ms. Lemieux. Good morning. Would you please state your name, your current position for the record? I'm just going to jump in here for a second. Mr. Nafio, I got to swear Ms. Brisson Lemieux in. Mr. Barber, I do that to you every time. I apologize. Not a problem. I was looking back at old transcripts. I do it every time. Do you mind if I, is it Brisson Lemieux? Is that, am I pronouncing that correctly? Yes. Could you please raise your right hand? Do you solemnly swear that the evidence you shall give relative to the cause now under consideration shall be the whole truth and nothing but the truth. So help you guys. I do. Okay. Thank you. Now, Ms. Lemieux, you've been properly turned in as a witness. I apologize. Would you please state your name and your position for the record? My name is Martine Brisson Lemieux. I am the Actuarial Director of Financial Integrity here at Blue Cross Blue Shield of Vermont. And how long have you held that position? Since November 2022. When did you first join Blue Cross? I joined in 2009. Yeah. Yeah. Let me, um, sorry. There's, there's some, uh, some of them. Not on mute. So if everyone except for Mr. Denafrio and Ms. Brisson Lemieux could mute themselves, please. Thank you. Sorry about that. Hearing officer, could they also just back up just a little bit? Just ask those last couple of questions again. If it's no trouble. Yeah. Do you know where, what the last, uh, part you got was? Yes, uh, where she was employed. How long have you held your current position? Since November 2022. And when did you join Blue Cross? I joined the Blue Cross actuarial team in 2009. Could you describe your roles and responsibilities briefly over that time period? Um, I started as an actuarial analyst and I was working on individual and small group break filings before the ACA market. And then I moved on to working on the filing for the ACA market. Um, I also worked on factors for the large group market and Medicare supplements. Through the years I was promoted, um, to associate actuary manager of actuarial services. And now I'm the actuarial director of financial integrity. My primary responsibilities have always been to work on premium filings and, um, setting rates. I've also been involved in our healthcare reform initiative. And supported the teams that work through larger scale models through the years, such as the COVID model and the RVD model. And have you been involved in this hearing process over the years? I have. I've been part of the team, uh, behind the scenes since, uh, 2014. Did you prepare and submit pre filed testimony for this proceeding? I did. And would you please, um, just tell us what exhibits in the exhibit binder your two, um, pre filed testimonies reside at. Um, my July 5th pre filed testimony is exhibit 18 and my July 10 supplemental pre filed testimony is exhibit 20. Thank you. Was all the testimony contained in those two, um, exhibits true and correct to the best of your knowledge at the time we submitted them? Yeah. And is that still true today? Thank you. Uh, I want to turn to the filings now. Were you responsible for preparing the filings, um, in the 2024 individual and small group markets currently under review? Yes, I was actively involved in the preparation of the filing and I am fully familiar with all aspects of the filing and the underlying rate development. Would you please turn to the table of contents in the binder? Yep. Um, are exhibits one through seven, the filing? Yeah. So those exhibits comprise all the elements of the filings for the two markets? Yeah, those are the filings, um, as filed on May 9th. Great. And did you certify the filings at the time they were made? I did. At the time of filing, I certified that they meet all actuarial standards of practice and that they comply with all applicable federal and state law and regulations. Uh, throughout the course of this proceeding, were you responsible for preparing the information and responses that Blue Cross has provided, um, in response to questions received, uh, through L&E from the board and the healthcare advocate? Uh, yes. I, um, all the information and the responses included in this filing were either prepared under my supervision or by another Blue Cross department when it was beyond my expertise. And do those questions and responses, are those questions and responses exhibits eight through thirteen in the binder? Yeah. Would you, um, just briefly summarize the proposed rates, uh, as filed? Um, at the time of filing, Blue Cross was requesting an average rate increase of fourteen and a half percent for the small group market and fifteen and a half percent for the individual market. And currently, um, Blue Cross is proposing somewhat different rates, correct? Correct. After the review from Lewis and Ellis and after adjustments that we are proposing to make, the rate increases are seventeen and a half percent for the small group market and eighteen percent for the individual market. Thank you. And we'll, and we'll talk a little bit later about why those changes took place. For now, would you, could you briefly summarize the key drivers behind the rates that Blue Cross is proposing this year? Yes. There were four primary drivers of the rate increases this year. The largest rating, uh, driver of the increase is the rising healthcare costs. Those includes medical, uh, claims and pharmacy claims. Average arrest on the two markets, that was about nine percent of the proposed rate increase. Um, we also have been receiving, uh, lower pharmaceutical rebates than we expected. And we continue this lower level, we expect a lower level of rebates to continue through twenty twenty four. Um, a third factor was that we are now treating COVID nineteen as any other respiratory virus and including the cost of care, treatment, vaccines, testing in the premium. That increases our rates by one point one percent approximately across the market. And finally, we are increasing our contribution to member reserve from one and a half percent to three percent because of the increasing trends and the risk inherent in this market. Thank you, Ms. Lemieux. Can I just ask one follow-up on the pharmacy rebates? What's the magnitude of that, um, change in the rate? Um, across both markets it's approximately one point three percent. Thank you. So I'd like to, uh, delve into the rate development process a little bit. At what point in the process do you calculate the difference between the current year's rates that you're proposing and the prior year's approved rates? We compare the rates we are developing to the prior approved rates once we have a rate to compare. So, said differently, we don't develop a rate increase, we develop a premium rate, and then we compare it to the prior approved rates. So do the, and like in this year as an example, did the approved calendar year 2023 rates play any role in developing your proposed 2024 rate? No, they did not. So at a high level, could you sum up how the rate development process works? Sure. We start with the most recent completed calendar year experience of actual claims from the members in this market. Um, and from there we apply a series of adjustments, uh, populations and trends, um, adjustments, uh, to get to projected paid claims for 2024. Um, we then add the cost of insurance to complete the rate development. So, could you just explain briefly what allowed charges are, what you mean by that? Yes, allowed charges, um, they represent the total payments for healthcare services. They include both the plan portions, the Blue Cross payments to providers, and member cost share. And what allowed charges did you use as a starting point for this year's rate development? We included all claims, uh, for the individual on the smallest market, so medical, pharmacy, pediatric vision, and pediatric dental claims. And for what year? For 2022. Thank you. Would you please turn to exhibit 18, your July 5th pre-filed testimony to pages 6 and 7. Um, you see there's a graph on page 7. Yes. Did you prepare that? I did. And which market is this graph, um, depicting? This is the individual market. If we were to, if you were to prepare a similar graph for the small group market, would it, uh, generally look the same? Yes. The numbers themselves would be slightly different, but the components would be the same and the directions of each component would be the same. Okay. Um, so starting from the left-hand side, would you kind of walk us through, um, the column that's part blue and part orange, and then the next three columns that are kind of dark blue? Yes. So the first column represents the experience allowed charges we just talked about. Um, the second column, we are calling it population and non-trend projection. That reflects, um, the adjustments we make to, um, recognize the population that is still enrolled with Blue Cross and we expect to be enrolled with Blue Cross in 2024. It also includes the components, other components that impact claims such as the addition of the hearing aid benefits or the changes in the expected changes in the insulin costs. So that's the column two, the smallest one of all. The second column, uh, the third column is the impact of the cost trend. So this includes both the medical cost trends and the pharmacy cost trends. And finally, the fourth column, the last blue column, is the impact of the utilization trend, both medical, pharmacy, um, and vision and dental, really. And those four columns together take us to the projected 2024 allowed charges. Thank you. Now, what about the two yellow columns with the downward facing arrows, um, next door? So the first yellow column is our non-system claims. So those are claims that, um, either don't take member cost share or are kind of outside of traditional claim payments. They include pharmaceutical rebates, um, the payments to the blueprint, payments to the vaccine for remodern program, our payment reform initiative. Um, altogether, those decrease the rates because the pharmacy rebates outweigh all the other components in there. And then the second yellow column reflects the risk adjustment transfer. That's a payment that we get from MVP and it reflects the relative differences in our members health status. Thank you. Now, what about the green, uh, downward facing arrow in the next column? So that column is, uh, reflects the expected member cost share, um, because the premium rate covers the portion of claims that will be paid by Blue Cross. This green bar reflects the portion of claims that is paid by members through deductible bank opening. And finally, what about the three gray columns, uh, to the right-hand side? The three great columns are the cost of insurance. So they are, they include the administrative cost, um, taxes and fees and the member, uh, the contribution to member reserve. And finally, what's the last column at the far right? Um, the last column on the far right adds it up all together. And is the projected, uh, premium, um, average on the PMPM. And does that kind of sequence of events, uh, sort of lay out the, the actual process you go through to develop the rate? I noticed that the far left-hand column and the far right-hand column are almost identical in the, in the PMPM. I think they're within a couple dollars of each other. Um, so are you able to draw any conclusions from that fact? Is it just a coincidence or is there, do you see any significance in it? Well, the fact that they're only $2 apart is a little bit of a coincidence. The small group graph would show us a $20 difference. But that still tells me that the vast majority of the premium is driven by healthcare costs. So in the course of the process you've just described, um, you and your actuarial team have to make a number of assumptions, right? Right. So does the, does that process result in a pinpoint answer for each element or category that you're, for which you're making an assumption? It does not. So for each of the boxes included in columns two through seven, there are many assumptions underlying each of the components. And for each of the components, um, my team and I worked, um, through using actuarial techniques and judgments to find, to come up with a reasonable assumption for each of the components. So that means as you're developing a rate, you have some ability to select values within those ranges you've described, right? Right. How do you make those choices? Um, we go by two basic principles which are that each assumption must be reasonable individually and then the assumptions when all put together in the aggregate must also be reasonable. So what if in the course of developing a rate you were to look at each range and set each value at the high end of the range? Um, that would maximize the likelihood that the resulting rate would be excessive. All of these assumptions are, um, trying to predict the unknown future. And we know even though we do, um, we do our best, we're only human and we're going to miss some ups, some downs. If we set all the assumptions at the very high end of the range, then the likelihood that the actual expenses and the claims come lower would be very high. And that would mean that the premiums would be high, too high, and that is the definition of an excessive rate. Um, and so what if you did the opposite and set each one kind of at the low end of the range? We would have the opposite problem. If we set all the assumptions at the very low end of each range, then the likelihood that actual claims would come in higher is very, very high. And so we would maximize the likelihood that the rates would be inadequate. So each of those two examples, would you agree as an instance of, um, where each individual choice might be reasonable on its own, but then as a group they are not reasonable together considered in the aggregate? Yes, that's correct. And like you said, as an actuary, you need to follow both of those principles when you develop a rate. Yes. Are you familiar with the concept of community rating? I am. Would you briefly describe what it is? So community rating is the concept that everyone that's in the same risk pool pays the same premiums. Outside of a few factors, um, like the benefit, the choice of benefit, or the family hearing, but everyone regardless of their health status. So it doesn't matter how old you are, if you have a chronic condition, you need surgery or pregnant, or you have absolutely no reason to need health care services. Through community rating, everyone's rate is the same. And do you use community rating in these markets? We do. It's required size amount and federal law. Um, in any given year, let's say in the individual market, do you typically see variation above and below the premium that all members were charged? Yes. There is a wide variation of health care claims at the member level. Each year we have a few members, one to three, or thereabouts, that incur over a million dollars of claims each, each year. And if we were to sum up, you know, the claims for the members that have little to no claims, we would need to add up the experience of thousands of members to equal the experience of those three members that had over a million dollars. And do you typically see that same phenomenon in the small group market? Yes, we do. Okay. I'd like to now turn to, um, Ellen's analysis of your rate. Have you had a chance to review the two, um, Lewis and Ellis reports that are exhibit 14 and 15 in the binders? Yes. Okay. Would you turn to exhibit 14, please? And turn to page 20. I'm there. Do you see about halfway down the page, there's a section titled recommendation? Yes. Would you, um, you don't need to read all the text, but just give the three bulleted items that Elleny recommended. Um, consider updated hospital budget information, reflect updated risk adjustment transfers, and reflect updated benefits. Thank you. And if you would quickly flip to, um, page 20 of exhibit 15. And I'm sorry, 14 was the Elleny report for the individual market, right? Correct. And 15 is for the small group market. Yes. So on page 20, did Elleny make the exact same recommendations regarding the small group final? They did. And what is Blue Cross's position with respect to these recommendations? Um, we agree that we should follow each of the recommendations. Now, in terms of the consider updated hospital budget information recommendation, what have you done, um, since the, the issuance of Elleny's report with respect to that recommendation? So we, um, once the hospital budget narratives were posted on the Green Mountain Care Board website, we, um, looked at them and recalculated our unit cost trends projections using the submitted hospital budget. And we also recalculated them using last year's ordered reduction to the hospital budget. What was that? What was last year's, um, what was the reduction that the Green Mountain Care Board ordered last year? What, what number did you use there? We used the separate 17% reduction. Thank you. Um, could you please flip to pages two and three of exhibit 20? And that's your supplemental pre-file testimony, right? Right. Um, could you please, um, I'm looking at, sorry, well, could you please direct us to where in your pre-file testimony you summarize the outcome of that analysis that you did? So, um, on page two, um, starting online, 18 summarizes the impact of the hospital budget as filed, which, uh, would increase the filing site about 2.1%. And then on the top of page three, uh, that summarizes the impact, um, of the hospital budget assuming a similar reduction as last year, the 17%. And that, um, would increase the rate by 1.4%. And I am, I am realizing now that there is a typo on that page. Um, which is, so on line 10 of page three, the 1.3 should be a 1.4. Okay. Um, and is that the change that Blue Cross believes should be implemented based on this recommendation? Yes. Thank you. Are there other changes besides three, um, L&E recommendations that Blue Cross believes should, should take place? Uh, yeah, we have two other changes we believe should take place. First, um, we believe the rates should reflect updated information we have for New Hampshire Hospital contracts that were renewed on July 1st, 2023. Um, the actual negotiated rates are lower than what was, um, originally estimated in the filing. And what's the other change that you recommend? We're recommending aligning, uh, the membership assumption used to calculate the silver load to, uh, use the assumption that Lewis and Alice recommended for MBT's individual filing. Why does Blue Cross, uh, recommend this change? Um, we're not doing this to try to gain some sort of market advantage. We are doing this for our subsidized members. These members who, um, whose subsidies will be based on the second lowest silver plan, um, they don't need to be paying an additional silver load on a Blue Cross plan without receiving an accompanying increase of their subsidies based on the second lowest silver plan. Would you please, uh, move to page five of the ticket points? Yeah. Um, does the table on page five reflect, uh, Blue Cross's current, the rates Blue Cross is currently proposing in these markets? Almost, but not quite. Um, since we filed, since I filed this supplemental pre-file testimony, the last hospital budget narrative was posted on the Green Mountain Care Board website. And adding that, uh, updated hospital budget narrative would increase these rates, these proposed rates by about 0.1 percent. So, so your, um, final proposed rate in the individual market is 18.1 percent? Yes. And your final proposed rate in the small group market is 17.6 percent? Yes. Okay, thank you. So just to, to, I'd like to wrap up, um, by taking, taking a look at the statutory criteria that govern this process, Ms. Lemieux. Okay. If you would turn to exhibit one, section 1.3, which is on page three, um, do you see that section 1.3 gives a, uh, a list of state and federal laws and regulations and legal authorities that govern this process and govern this filing? Yeah. And in your, um, professional opinion as Blue Cross' chief actuary, do the filings comply with those requirements? They do. Um, I wanted to ask you some questions about the Vermont statutory criteria. Okay. Are the rates that Blue Cross is proposing in these markets unjust, unfair, inequitable, misleading, or contrary to Vermont law? No. Are they excessive? No. Are they inadequate? No. Are they unfairly discriminatory? No. Do they protect Blue Cross' solvency? Yeah. Do they promote quality care? Yeah. Do they promote access to care? Yeah. Are they affordable? Yeah. Could you please explain from your standpoint as Blue Cross' chief actuary why you believe the rates are affordable? Well, there's no definition of affordability in the statute, the board rules, or even the actuarial standards of practice. When I think of affordability, I think of what insurance is and what the alternative is. In our current system, the alternative is to be uninsured. So is it more affordable to be uninsured and to pay for your healthcare needs when they come up? That might be true for some people with very limited healthcare needs, but for members with any sort of high claims or not that high claims, right? But whether you have a cancer diagnosis, your child breaks their leg, you get pregnant, or you need a life changing drug that costs hundreds of thousand dollars a month. For them, the answer is undoubtedly no. It would not be more affordable to be uninsured. And every Vermonter through, you know, will at some point need to access healthcare services and care that they could not afford without insurance. Very expensive medical care. Ms. Lemieux, what do you see as Blue Cross' core role as a health insurer in Vermont's healthcare system? As I just said, we are the alternative that allows Vermonters to avoid the direct exposure to very high cost, very high price healthcare services. And when Vermonters find themselves in an unexpected situation facing unforeseen healthcare needs, we are here to help them cover their costs. Thank you, Ms. Lemieux. That concludes Ms. Lemieux's direct testimony. Thank you, Mr. Vector. Do you have questions for Ms. Lemieux? I do have questions hearing Officer Barber. Thank you. Good morning, Ms. Brisson Lemieux. Is that right? That is right. And Ms. Lemieux is also correct. Okay. I'll go with Ms. Lemieux. Thank you. And so this is your first year testifying. Is that right? Right. This is my first year questioning witnesses at a rate review hearing. So we'll get through this together. Okay? Sounds good. Okay. All right. And I'm going to do my best to direct you to the appropriate exhibit as I go through my questions and also the correct page. But if you're not seeing what I'm talking about, please let me know. Okay? Okay. All right. Here we go. In your pre-filed testimony and under direct examination, you described the rate development process. Correct? Yeah. And that rate development process is an actuarial process. Is that right? Yeah. Okay. And that's why you developed the rates, right? Not the accounting team. Yes. That's right. Okay. So let me try to state a very oversimplified summary of what I heard you describe as being the rate development process. First, you add up all the claims from the most recent completed year. In this case, it was 2022. Is that right? Yeah. Okay. And then you project or predict what allowed charges are likely to be for the plan year that you're developing rates for. Is that right? Yeah. And you do that by making various adjustments for population changes, like as our population getting sicker or healthier, younger or older, things like that. Yeah. Okay. You make predictions about all, make predictions and then you develop what's called an index rate. Is that right? That's right. Okay. And then to that index rate, you apply what you call trend to medical and pharmacy utilization and cost components. Is that accurate? Okay. And would you agree, and I think I already heard you testify to that effect, that there's quite a bit of subjectivity involved in the development of rates? That is that you have to make a lot of decisions and assumptions? We have to make a lot of assumptions, yes. Okay. So the rates that are filed, those top line numbers, rates are going up by 18%, for example. How many assumptions go into deriving that number? Can you just give me a rough guess? Probably 50 to 100. That's what I wrote. 50 to 100. Very good. All right. And realistically, not even the best actuary is going to make all the correct assumptions. Is that fair? No. That's fair. Okay. Talk now a little bit about affordability. You talked a little bit about the non-actuarial factors in your memo, I think beginning on page 8 of exhibit 1. But really, this memo that you provided is an actuarial memo. Correct? I mean, it's labeled an actuarial memo. It is an actuarial memo, but I do rely on the knowledge of other experts here at Blue Cross to be able to certify this memo. It is not only my knowledge that goes into creating these rates. Okay. Very good. Fair enough. Yep. Thank you. Is it fair to say, though, that the main justifications for the rates are actuarial in nature? That's why you submit this actuarial memo? Yes. The rate development themselves is an actuarial actuary. Okay. And I think I heard you say that affordability is not an actuarial term or concept. It is not defined in the actuarial standards of practice. Okay. And you don't have a specific number or formula you use to assess whether the rates are affordable. Is that right? I do not. Okay. In your role at Blue Cross, do you hear from Vermonters that they struggle to afford health insurance? I do. Okay. Similarly, there's no metric or formula to evaluate whether the rates promote access to care. Is that right? I don't believe there's a formula for it. Okay. Do you hear from Vermonters that even with insurance they're reluctant to access care because of high deductibles? I have read the comments that say that, yes. Okay. All right. So I'm going to move on now and talk about trend. Probably one of your favorite things, right? All right. All right. There we go with that. Trends. Starting with medical trend. Trend, and specifically medical trend, that makes up a big chunk of the overall rate increase. Is that right? That's correct. Is it about close to half of the overall rate increase or a little lower? The medical component would be about half of it, yes. About half. Okay. So then it's really important to get the medical trend numbers right. Would you agree? Yes. Okay. So starting with the medical unit cost trend, if I could have you turn to page 24 of exhibit one. This is your actuarial memorandum. Yes. Okay. And if I could have you read the last paragraph in the last sentence in the paragraph under unit cost, the second paragraph under unit cost. That last sentence beginning for hospitals under GMB jurisdiction. For hospitals under the jurisdiction of the Green Out and Care Board, we start with the assumption that the board will approve hospital budgets for the 2023 cycle that are equal to the commercial increases approved in the 2021 cycle. Okay. Thank you. In retrospect, that was not a good assumption. Is that right? That was much lower than what was submitted recently, yes. Okay. And I'm trying to understand why you let off with that assumption. Did you have data that led you to believe that pressures on hospitals were cooling off? For that specific assumption, we worked with our provider contracting team, and we felt that at the time of filing, it would be the right assumption to put in there. Okay. In retrospect, though, it seems overly optimistic. I think I just heard you say something close to that. Some hospitals actually had budgets that were pretty low that were just submitted, but the ones that are really driving the increases were much higher than two years ago. Fair enough. Thank you. Quickly, if you could just turn to your supplemental refiled, which is exhibit 20, page two. And I'll just go through this quickly. You already went through it with your attorney, Mr. Donafrio. On page two, you respond to a question about the impact of the hospital budgets, and you don't provide a precise trend, right? But you estimate that setting the unit cost trend to the amount requested by hospitals would increase the rates, not the trend, but the rates by 2.1%. Do I have that right? That's right. Okay. And then on page three, you go on to answer a hypothetical presented to you, assuming the board requires Blue Cross to cut the hospital's requests by 17%. And your response to that question was that what you identified that there was a typo there, and that really if the board ordered hospital budgets to be cut by 17%, that the rates would go up by 1.4%. Is that right? That's correct. At this time, is it safe to say you don't know what's going to happen with the hospital budgets? I do not know what will happen with the hospital budget. And that this large component of overall trend, nearly half of your medical cost trend, is still quite uncertain? Is that accurate? Yeah. That's accurate. Turning back to your actuarial memorandum exhibit one, page 24. You could let me know when you're there. I am there. Okay. That last full paragraph on the page, could you read that first sentence in that paragraph beginning with we assumed? We assumed for other providers within the Blue Cross service area that overall 2023 and 2024 budget increases would be the average of the increases implemented during the 2021 cycle and the 2022 cycle. With the exception that we have reflected any more recent information from our early negotiation with providers. Okay. Is it correct? Are you still holding on to that assumption? Other than the known changes for the July 2023 contract that were negotiated and signed, yes, we, for the other hospitals, we still hold to that assumption. Okay. Does that reflect at all that maybe for these other hospitals that maybe some of the inflationary pressures they were experiencing are easing? Maybe, but I am not an expert in hospital accounting. Okay. Very good. If you could turn to page 25 now. You say there that for providers outside the Blue Cross Blue Shield of Vermont service area, you derive trend from a confidential and proprietary Blue Cross Blue Shield Association fall 22 2022 blue trend survey. Do I have that right? That's correct. Does that trend survey enable you to compare Vermont trend to trend in other areas of the country? We can compare where our submission that went into the survey where we fall in total compared to the other booth plans who participate in the survey, but not necessarily how specific hospital areas compare to each other. Okay. Are you able to say, I mean, do you know offhand is Vermont trending higher than much of the rest of the country? I don't know offhand, but we could follow up. Okay. I was just curious. Thank you. Is it also true though that none of the underlying data from that confidential and proprietary survey was submitted into the record here in these proceedings? That's correct. Okay. So there's really no way for anybody to check the assumptions related to this particular component of the cost trend. Is that right? That's right. Okay. So in reading your memo, I noticed that you use the phrase, we select quite a bit. Don't you? That right? Yeah. Okay. So when you say, for example, on page 27 of your memo for facility claims, we select a 0.5% utilization trend. What that language really conveys, and you've already testified a bit to this, is that there are other numbers that are possible, but you're selecting one possible number. Is that right? That's right. There's a range of reasonable answer, but we have to select one so that we can calculate one premium rate. Okay. Yeah. Thank you. And I had it in mind that I was going to run through a couple of examples, but I think in the interest of time, I'm going to skip over the examples. I think the point's been adequately made that there's a range of possible numbers that you could select from. But I would like to ask you, for these selections you're making, is it true that as a rule, they're not 100% accurate? I mean, it would be impossible. If I get an assumption exactly right, I would buy a lottery ticket. There we go. And if I could just quickly have you turn to exhibit 14, which is Eleni's individual market memorandum to page 5. And I just want to point out, I mean, I'm seeing here there's a chart on the page, and the very first line item is 2022 actual projected claims experience, and there's a downward adjustment there of negative 5.7%. Am I reading that right? That's what it says. And that means that for 2022, you overestimated trend by 5.7%. Is that right? Not quite. So, Eleni, my understanding is that Eleni does this chart by comparing the URT, the unified rate review templates from one year to the other. And that particular line item in the 2023 filing, so reflecting 2021, did not include the cost of COVID. So it's slightly different. When I look at how our implicit, so in the 2023 rate, right, it went from 2021 to 2023. So there was a middle, like an implicit 2022. And when I compare that to the actual 2022, they were really close. Okay. All right. Well, I appreciate that. Thank you. I skipped over some medical trend questions, but I do want to ask you about pharmacy trends. So if we could go back to your actual memorandum exhibit one and turn to page 33. And so I just got there. Are you there? I am there. Okay. And really here, I want to tee up some questions that I'm going to want to follow up on an executive session since ultimately my questions here relate to exhibit two, page 35, which is one of your actuarial exhibits exhibit three I you don't need to turn there now because we're not going to talk about it. But I'm seeing these questions up because I want to talk about that exhibit down the road. And that exhibit is mostly redacted. So I do though, here in open session want to get you on the record about a few things. So on page 34, I brought you to page 33. I meant 34. Could you read the second sentence under the heading generic cost trend that first paragraph. We select 3.8% for the generic cost trend, which is roughly the average of the 24 month regression and the year over year results. Thank you. And is it correct that your generic cost trend is based off AWP, which is the average wholesale price. That's correct. Okay. Now the brand cost trend. Could you read the second sentence in the last full paragraph on page 34. We select 10.5% for the brand cost trend, which is the average of the 24 month regression on monthly data and the most recent year over year results. And your brand cost trend is also based off AWP. Is that correct? That's correct. Okay. On page 35, you discussed specialty drug trend and you blend utilization and cost together, which is a little different than how you've done the other ones. Could you read the second sentence in the final paragraph under the heading specialty drugs. We select 19.5% as a contracted adjusted trend. Okay. Thank you. And you don't say so in this paragraph, but is it also true that the cost component of this specialty drug trend is based off AWP? So for specialty trends, we do select a total allowed trend, which includes cost and utilization. So that's our selection. Now for URRT purposes, we do split out between utilization and cost. And in the URRT or for URRT purposes, is the specialty cost trend based off AWP? No. For this particular one, we calculated the utilization trend and then sort of back into a cost trend. So it would be based on allowed charges. Very interesting. Okay. Thank you. The next section changes in pharmacy contracts. Could you read the first two sentences under that heading changes in pharmacy contracts? Vermont Blue Rx has established contracted rates with its new PBM that continues to provide substantial savings to consumers. Furthermore, the contract includes annual discount improvements that will impact a projected pharmacy allowed charges. Okay. Thank you. The annual discount improvements, I'm going to hold off asking you anything more about those until we have an executive session. The substantial savings reference there generated by your PBM. I have a few questions about that. So if we could turn to exhibit 13, which are your responses to HCA questions and specifically your response to question seven, which is on page five of exhibit 13. You cite two factors for the savings generated by your PBM. You cite improvements in ingredient cost through better negotiated discounts and improvements in rebates. Do I have that right? That's right. Okay. When you say improvements in ingredient cost, the ingredient cost you're referring to that you're getting an improvement from, that's the average wholesale price. Is that right? It's a discount on the average wholesale price. So the allowed charges for a pharmacy scrap is starts with the average wholesale price. And then we have a negotiated discount with our PBM to reduce that cost. So it's a discount off of AWP? Yes. Okay. AWP is confidential and proprietary. Is that right? I don't believe it is. Can the average person go online and download an AWP pricing file? Do you know? I don't know. Okay. All right. Is there a single source for AWP or are there various sources for AWP? I believe there is a single source, but I can confirm. Okay. Thank you. Is it true in the industry? I mean, is AWP known to be an inflated figure? You're getting a discount. Object to the form, it's a bit vague, the use of the word inflated. Is AWP known to be a higher price than is actually paid for for these drugs ultimately? It depends on who we're talking paid for. There are many layers in the pharmacy industry before it gets to the insurance company. And I know I know this, but right now I'm not remembering all the different components of the pharma industry. It's okay. It's all blurring for me too. Blue Cross is not paying AWP for the drugs its members utilize. Is it? No, we're not. Okay. AWP is not what your PBM is reimbursing pharmacies at for these drugs either. Is it? I don't know that component. Your actual ingredient costs are some unknown to us amounts below AWP. And so the substantial savings you're getting are savings off of a price that's artificially higher. It's higher than what the drugs cost. Well, the savings we calculated, we're really trying to compare the contracted discounts we had with a prior PBM. So the savings we are showing on this page are really just an estimate because we don't have a contract with the prior PBM. But it's to show the impact of the decision Blue Cross made to change the PBM and how that was helping these rates and helping our members. So you're getting a better deal with this PBM. That's fair. That's fair. Okay. When a member is in the deductible phase and they have to pay their full costs in full, do you know are they paying AWP at the pharmacy counter? They are not. Okay. They're getting your discount. Yeah. Our members are getting our discount. Okay. You also cite higher rebates from your new PBM than from your previous PBM. And your job, is it a part of your duties to keep abreast of current developments in your field? Would that include things like the impact that rebates are having on drug prices? To a certain extent. I can tell you the impact of the actual rebates we've received in this market and our projection of what we will receive in 2024 and that impact on our rates. Have you read anywhere in your reading about your field that manufacturers are raising list prices in order to be able to discount them and to provide rebates? I read that recently, but I have not recently kept up with all of the pharma teams. Okay. Thank you. One last question about rebates. Blue Cross gets the rebates or whatever percentage of the rebate they've negotiated with their PBM to receive but not the individual member who is utilizing the drug that generates the rebate. Is that right? That's right. I remember that pays these premiums gets a little bit from all the rebates because all of their premiums are lower. Okay. I have a few questions about your PBM. Are these appropriate for you? Should I try them with you and if they're not, I could save them for someone else? Directly with the relationship with the PBM might be better suited for Dr. Weisel. Okay. I mean, let me just try this. And if you don't feel like you're the appropriate person to be asking, I'll save it for Dr. Weisel. Okay. You contract with a PBM to manage your pharmacy benefit for these QHP products. Is that right? That's right. And Optum is your PBM, right? Optum RX, yes. Okay. I'm just curious why you call it in your filings blue RX and you don't refer to Optum. I think that is the agreed name that we are talking for the PBM, but I can follow up on all kinds of reasons why it has a few different names. Okay. I mean, we just talked about you keeping up on trends and news. I mean, you know that there's a significant amount of controversy about PBMs and the role they play in the healthcare system, right? Yeah. And are you aware that all three of the big PBMs, of which Optum is a one that they're currently being investigated by the Federal Trade Commission? I was not aware. Blue Cross Blue Shield recently switched to Optum within the past two or three years. Is that right? Right. July 2021. Okay. Do you know if Blue Cross Blue Shield of Vermont has yet done a full audit of your compliance with Optum's compliance with your contract so you can be sure that you're getting all the deals you're entitled to? I know that we are in the process of some audits. I do not know the status of the depth of that audit. Okay. Thank you. I'm going to move on to CTR and that's the last I have for you. So we're almost there. Okay. All right. Thank you. Exhibit one. Exhibit one. Your memorandum, page 47. Okay. Could you read the first sentence under contribution to member reserves? As directed by the Blue Cross Vermont Management, the file rate includes a nominal 3% contribution to reserve. Thank you. I was trying to figure out ahead of the hearing what a 3% CTR comes out to on a PMPM basis. I don't see that figure in your memo. Is it in your memo? It's not in the memo. It's on exhibit seven B. So that's exhibit two and then way, way, way back at seven B. Okay. I'll find the page because I've done my own calculations, but if you've already done it, no sense going through mine. Okay. So I see the small group market. That's page 59. Oh, yep. There it is. And that's close to what I calculated. All right. All right. And then do we know where the seven B is for the individual market? It's page 46 of exhibit two. Okay. Thank you. So on a PMPM basis in the individual market, what is it come out to roughly just a rough number for a month for CTR? 3% on the individual market is approximately $26 per member per month. Okay. And on the small group market? $23. And so over the course of a year, 12 months, that's in the neighborhood of $300 a year. And then for a family plan, it would be fair to multiply that by three. $900 a year. Yeah. Family plan is 2.8%. So right around there. Yeah. Do you think a lot of your members would be happy to receive a $900 check in the mail? Probably. What I'm asking is, do you really, is 3% really nominal? I hate to quibble over word choice, but nominal. Object to the form. The argumentative. No, but it's. Objection over world. Please answer the question if you can. Was really, because last year we had a file contribution to reserve of 1.5%. But then the effective contribution to reserve was lower because we had taken out the cost of COVID treatment and testing out of the contribution to reserve. So nominal in here means that it is the 3% we are requesting and there are no reduction to that. And so both the nominal and the effective contribution to reserve are 3%. Well, that makes sense. Thank you. Do we know what the 3% CTR comes out to in total dollars for both markets? You probably know it off the top of your head. Again, I did my own numbers, but I bet yours are better. That number stored in my brain this morning. Okay. If I said about 13.2 million, does that sound like it's in the ballpark? Ruth confirmed as I am sure she's doing the map right now and I'll have her confirm with you later. Okay. Maybe I should say that question for Ruth then. And and I'll leave it at that. Thank you. Thank you very much. Thank you. Thank you. I think now would be a good time to take a quick. Bio break. And then we can move on to board questions. So if we could. Reconvene at nine. 35. Seven minutes. Off the record. On the record. Thank you. And. Before we move to board questions, Miss Bello, do you have any questions for. Miss Lemio. I do not at this time. Thank you. Thank you. Then go to a board member lunch. Thank you. Good morning, everyone. I hope everyone's doing okay. So I'm good. I wanted to ask you a couple of questions about the trend calculations. So in your testimony today, you spoke about how in your analysis, you consider a range of options for the different assumptions. Could you tell us what the range of the medical trend that you considered was. Right now, but we definitely were. Could have justified trends up to one, one and a half percent for the medical facility side. And could you, could you provide us after the hearing, the lower and higher ends of the range that you considered, please. Yeah. Okay. Similarly for prescription drug trend, do you happen to know the prescription drug lower and higher range that you considered? Or is that something that you could provide after the hearing? We can provide it after the hearing. I can tell you that on the prescription drug side, at least on the utilization side, it's much, much narrower. It's been very consistent. Okay. Thank you. I want to turn for a moment around to the issue of the prescription drug rebates. So the way the drug rebates are reflected in the rate, and please correct me if I'm wrong. But first you remove the rebate that you received for 2022. Is that correct? So the way we do it in the, on exhibit five is that that reflects our expectation of the 2024 rebates. And to get there, we sum up the 2022 rebates and apply adjustments to get them to our expected 2024 rebates. Yes. But first you would remove the 2022 rebates from the experience period assumption. We don't include them in the allowed charges that we showed on the graph. So we don't really remove them. They're just not in that graph, in that bar chart. Okay. But in exhibit one page 20, you have a calculation related to rebates where in this summarizes how you get to the PMPM for 2024. Is that right? On pages 12 and 13, right? I was looking at 20, but we can go to 12 and 13 if that makes sense for you. Oh, 20. So it's just so on in the URP template, we have to include pharmacy rebates in the allowed charges. But in the way we do the rate development, we don't. So I just wanted to be clear. So I am on page 20 now. Okay. So on page 20, you have a calculation for the trend in your rebates. Correct? Yeah. Okay. And in, so in, but earlier in your description, you mentioned that there has been an issue with lower rates than expected. Could you explain that issue in a little more detail? Yeah. So in 2022, in our 2022 premium, right, we had an expected rebate amount and the actual 2022 rebates came in lower than that expected amount. There are many reasons that could happen, but the main reasons we've pinpointed for that is that we are seeing more pharmacy claims, mostly specialty pharmacy claims that are being filled at hospitals own retail pharmacies. And most of those claims are 340B claims. So claims that the hospitals can get at a lower discount than Blue Cross can. And usually manufacturers don't consider those claims rebate eligible. So we are not getting rebates on most claims that are 340B claims filled at hospital own retail pharmacies. Okay. The hospital, however, would be getting a rebate. They are, my understanding of the program is that they are paying a very discounted price for the drug. And we are paying them our higher contracted rate. So it's not a rebate after the fact per se, but it's a discounted price at the beginning of the process. Okay. Thank you. So where is that reflected in your rebate trend calculation? So it's reflected on our, in our base experience in our 2022 rebate experience. So we're not assuming that, we're assuming that the, what happened in 2022 will continue and not that it will worsen or change the pattern. Okay. Thank you. I do have some questions about RBC, but I think I will hold those for Ruth because it's related to different contributions to RBC. Does that sound fair to you? She seems like the right person. Okay. Great. And I have some questions related to your healthcare reform plans. I assume that would be Dr. Weigel or Ruth. Is that correct? Yes. Dr. Weigel is ready to answer those questions. Okay. All right. So I think that's it for me. Thank you, Randy. Board member Holmes. Thank you. And thank you. And welcome to the board. And welcome to a long day at the board. Several of my questions actually answered by your testimony, but I do have a couple remaining that I think would be best answered by you. So Blue Cross Blue Shield did not include COVID testing and treatment and vaccine costs in previous filings. Right. I think you testified to that. I think that was in the... That's correct. ...interviews. Okay. Can you turn to page 15 of exhibit 15, which is actually the L&E analysis? I think it's for the small group filing, although there is a similar page, page 15 on exhibit 14 that says the same. Can you just read the first paragraph under the changes related to COVID-19? And tell me if that's accurate. I'm still trying to find it. Give me a minute. No worries. Starts with last year's filing. Yeah. Yeah. Last year's filing contains two adjustments related to COVID-19. Firstly, Blue Cross previously removed direct COVID-related costs from the base period, replacing them with a smaller looking foreign figure. With the end of the public health emergency, BCBSVT is now incorporating COVID costs into the rates as any other disease and assuming that the 2024 cost will mirror 2022 costs. This change increases projected claims by about 1.9%. Okay. Is that assessment of what you did accurate? Yeah. So last year, we had included COVID, direct COVID costs in the allowed charges, but then removed the equivalent on a PMPN basis from the contribution to reserve, which is why we had that conversation a few minutes ago about the nominal and the effective contribution to reserve. And the reason that was done was really to follow the rules, the URT rules, so that the allowed charges reflected the allowed charges. And this year, we are including the direct COVID costs and the allowed charges, but there is no, we are not taking them out of the contribution to reserve. Okay. So when it says that you're assuming that the 2024 costs will mirror the 2022 costs, does that mean that you're assuming that the treatment and the vaccine and the testing costs in 2024 are based on the experience in 2022? Yeah. Okay. So I actually went to the CDC website recently to see if 2023 mirrors 2022. Assuming that, you know, we can see what's happened since 2022 to see if the assumption that 2024 is going to reflect 2022 seems like a robust assumption. And if you look at January 15 of 2022, for example, the CDC website has 151,000 hospital admissions for COVID. And if you look then at January 15 of 2023, that hospital admission rate is down to 37,000. And if you look at July 8 of 2022, there were 39,000 new hospital admissions. And if you look at last week, there were only 6,000. And if you do the same analysis for ED visits that were reflective of COVID, you know, people going to the ED for COVID, you see a huge similar precipitous decline in ED visits. For example, January 15 to 2022, it's 13% of all ED visits. And in January 15 of 2023, it was 2.6%. It's now down to 0.6% of all visits. So I guess what I'm trying to understand is, and maybe I just don't understand the process that you used or the rationale that you have for assuming that the 2024 experience will mirror the 2022 experience when just watching what's happened in 2023, hospitalization rates have plummeted, ED visits have plummeted, and the public health emergency is over, presumably because we're not seeing the incidents that we did in 2022. And then I would assume the associated costs with that incident. So if I'm understanding incorrectly, please help me. So we assume that the 2024 costs for everything related to COVID would be based on the 2022 data. And when we looked at early, very early at 2023 data, some lines of business were lower, some were slightly higher. And what our overall assumption is, is that we are now treating COVID like any other respiratory riser, whether it's RSV or the flu. And all of them have worse years than others, right? Most recently RSV was everywhere, right? And I couldn't remember hearing so much about it. And so we're assuming that COVID, while some years might be lower, some years might be lower or higher, it will be either the same with other respiratory risers. So we didn't want to treat COVID differently than all the other viruses that are going on and either fiking or not through the seasonal pattern that they have. But I mean, we had a public health emergency in 2022, which really makes it much different than all the other respiratory viruses. And the incidence rates were exceedingly high in 2022. So I think evidence suggests that we were, in fact, in a spike in 2022 for that particular respiratory virus. So assuming it's the same as all of the others would also assume that there was, you know, that there's not this spike and that there's a fairly regular distribution to those respiratory viruses, but there wasn't. So I guess, let me ask you this, if you were to recalculate the impact, which is for the small group market, it's an increase in claims by about 1.9%. If you were to update that analysis using the experience from January 2023 to January, July of 2023, what would that estimate look like? And I recognize you can't do that on your feet right now, but would you be able to supply an updated analysis of what the projected impact for 2024 would be if you use the experience that we have the most recent six months of experience or whatever you have in terms of claims available to you? Yes, we can take that as a follow-up. We'll just need to be careful about the run-out that we use because there is a lag between when the claims are assured and when we receive them. Yeah, I mean, and also, I mean, perhaps you could use, and I guess I would ask you if you'd be willing to use the CDC numbers that are reflective of what the experience is across the country in terms of COVID to make that projection for 2024. At least incorporate it. The reason I am pausing is that I know that Vermont fared very differently through this whole pandemic as the national average is. And so unless there are some specific Vermont or Northeast numbers, I would be cautious about using nationwide numbers for something that we know did not impact the country similarly, depending on the region. That's fine. If you wouldn't mind turning to page 27 of exhibit one. Okay, so if you just actually look at the Vermont COVID rate that you submitted, it has an enormous spike in the beginning of 2022 for Vermont relative to the rest of the year. So again, that's an example where you're including 2022's enormous spike in COVID in your projections for 2024. So I guess I would ask if you would, you know, take a look at this and reevaluate perhaps with some more updated COVID data and information as a follow-up. My second question is about the, this is again, it's about the way that you arrived at the hearing aid benefit. I think for both filings, it was $1.30 per member per month. And if I followed the answers to the questions about how that was evaluated, it looks like it's not based on any Blue Cross Blue Shield member experience, but it's proxied by estimates from surveys. And I recognize you didn't, you know, you had to start from scratch and try and figure out how to estimate this because you don't have the claims experience for this particular benefit. And it looked like you used the US American Community Survey to estimate hearing loss incidents. And as you just said, sometimes national numbers don't always reflect what's happening in Vermont. So I'm wondering if you evaluated whether that population is statistically relevant for the individual in the small group market for hearing loss incidents. Do they, is it similarly that population, the demographics in that American Community Survey similar to the population that we would expect to be on the individual in small group market? So in cases where we don't have data, right, like the hearing aid benefit, we have to rely on outside sources. For this calculation, we had incidents of hearing loss in the use of hearing aids by some age bands. So we were able to at least apply those to the demographics of the markets we are pricing. Okay. And similarly, you use the National Institute of Health data to estimate the take-up rate of hearing aids among those with hearing loss, right? And the assumption again there is that that take-up rate will be similar to the individual in small group members here. That is our assumption. It was interesting, and I'm asking these questions because MVP actually based their Vermont expected costs on their actual New York experience in their small group and individual markets because they had a hearing aid benefit there. So it's a more direct comparison to a specific population and a specific claims experience. They arrived at 34 cents per member per month, which is again pretty significantly different than the $1.30 that Blue Cross Bushield estimated at. Again, I recognize you did the best that you could relying on national surveys and other things. Wakeley's estimates from the essential health benefits working group were actually between 30 cents and 60 cents. So again, Blue Cross Bushield's estimate here is significantly higher than either MVP's experience in New York or Wakeley's estimates. So my question here is, is it possible that reliance on these multiple national surveys rather than claims experience could lead to an inflated projection of what the actual cost would be? It could be inflated or under, right? I don't know. In this particular case, it appears based on the two other points that you had that our number is higher. But in other assumptions, it could be lower, right? So we do the best we can with the information we have, and we don't have hearing aid data in our claims right now. OK. Are there any other cost savings initiatives or opportunities that you became aware of after the filing was submitted? Then this could be internal to Blue Cross Bushield, some new initiatives that might save costs or external to Blue Cross Bushield, market trends, reductions in prices of certain drugs. I know you've already included the insulin reductions from the pharmaceutical companies. But is there anything that you now know that you didn't know back at the time of the filing that might achieve some cost savings for your members? I don't know of any new programs between early May and today. OK. Thank you. I think the rest of my questions are actually probably for the other witnesses. So thank you. Thank you. Member Merman, do you have questions? Yeah, I just have a few. Hello, Ms. Lemieux. I'm new to these hearings as well. So you'll just have to bear with me. But I just have a few questions. I just wanted to follow up on some of the COVID questions. I had similar questions. Do you look at your influenza experience separately from other respiratory viruses or other medical trend? No, we don't. OK. With regards to the 2022 COVID data in Vermont, are you aware that that also included the Omicron search? Yeah, that was the January search, right? 2022? Yeah. So that as far as my understanding of COVID admissions and testing and treatment was the peak utilization within Vermont and nationally. Do you know if that's the similar, are you aware of a similar usage there? It appears to be the peak we've seen, right? I don't think we've seen any peak since. And do you know if your COVID medical trend from 2022 breaks out inpatient, outpatient, testing, treatment in separate categories? I don't have that today, but we could get that data. I would ask that you actually send that data to us as well. I think that'd be helpful in looking at that to understand how that potentially could affect the 2024 use. One thing that has changed significantly since then for, if not all hospitals in Vermont, but most hospitals in Vermont, is they're not routinely testing COVID on all admissions. That my guess will change in the winter months when there's other respiratory viruses, largely because they're a combined swab now, as you may be aware, which is why we know about so much more RSV in the world because it's all that influenza RSV COVID swab, but that's a pretty significant expense too. Okay, if we could get the broken out data, that would be very helpful. My other questions are actually on the 340B program. So I'm still trying to understand sort of the nuance here of how, if you could go into a little bit more detail from what you testified earlier and member lunch's questions, but how is it that insurance rates rise when hospitals utilize the 340B program? It's the pharmaceutical rebate component of the premium that rises because we're getting less rebates. Now, I am not a hospital accountant. I don't understand all of that, but anything that they receive or that they have savings from on the 340B program, I can't tell you how that then flows through premium rates. What I can tell you is that we are getting less rebates and I have to reflect that in our premium. And you said, you testified earlier that the discount that a hospital gets when they purchase a drug through a 340B program is not then passed on to the insurer. That's correct. And you're getting the previously contracted rate on that specific medication? Yes. So my understanding is that we have a contract with our PBM for the cost of a drug, right? And the pharmacies, whether they're a hospital or not, they get that price from us. But that's not necessarily the price they paid to purchase the drug. It's the price that we pay to them because they administered that drug to one of our members. And if they didn't buy it through the 340B program and there was a rebate, then that rebate goes to the PBM, not to the hospital. Is that correct? Right. And then it comes to the insurance company and we get to reflect those additional rebates in our premium. Okay. So my main interest in this topic is actually in specialty drugs. Do you know what percentage in Vermont of the specialty drugs that are delivered through hospital-based chains are purchased through a 340B program? I don't have that information. What we can get is the percentage of specialty drugs, medications that we submit for rebates that are then denied because they are deemed not eligible for rebates due to being a 340B drug. So I only have R lens. That makes, that's actually super helpful. Sorry, I wouldn't expect you to have that other lens. I guess you can't. But that information would actually be, I think, quite interesting and helpful to understand this nuance if that could be supplied, even if confidential, I would assume. So there was also a mention in your testimony about how, let me just see if I can find my page here. I apologize. Well, I will try to find it in a minute here. One of the things that was driving up insurance that premiums was that more pharmaceuticals are being delivered through hospital pharmacies. Does that reflect your testimony correctly? Yes. So it's because of the rebate issue, right? And so the more strips go and are dispensed through hospital pharmacies, retail hospitals, the less potential rebates we can get. And so that's the connection to the premium rate. So if a hospital gets, let's say, a 10% rate increase, do you know if that reflects that their pharmaceutical drops rise by 10% as well? I don't know how the hospitals get to their requested rate increase. OK. And do you know if the 340B program applies to both inpatient and outpatient hospital-based pharmacies and medications delivered through those? I believe it's outpatient, but I can get confirmation. OK. That is all I have for you right now. Thank you. Thank you. Chair Foster. Thank you. Ms. Lemieux, are you the best witness to ask about how the rate promotes access? OK. Are you the best witness to address the affordability issue? But those questions could also be answered by Ms. Green and Dr. Weichel. All right. Are you the best witness to address how Blue Cross divvies up its rate increase across its provider network? Will we be best answered by Dr. Weichel? Can we start with affordability? And you had indicated you weren't aware of a definition, and you gave us, I think, a framework. Can you remind the framework that I wrote down was that you consider affordability in light of what the alternative to not having insurance would be. Can you explain that to me? It is something affordable, just in general. Right? I think what are my other options? What's the alternative? And in our current healthcare system, the alternative to insurance rates is going uninsured. So that's the lens I put on affordability. And is that the framework that you think the board should use to evaluate it? One of the many lenses that should be looked at, it's important. I think it's important to think of affordability to whom and for what. And in this context, it has a lot of different stakeholders. Our premium rates are paid by our members, and we use them to pay providers. So it's that whole system and that whole chain. And so affordability to who and for what, I think it's the wide lens that we should put. And we shouldn't narrow it down to only one perspective. You said there are other lenses that the board should consider in evaluating affordability in your submission, your representation that these are affordable rates. What are the other lenses you think the board should consider? But also what we blew across kind of passed the money on to providers, right? And like we saw in the graph I was walking all of us through, the vast majority of the premium paid by consumers, by Vermonters, go directly to paid providers. A big majority of it is Vermont providers. And so that's another lens we need to look at. Is it what we are using these rates for, who in the end is getting that money? And a lot of it, over 90% of it goes to providers to pay for, whether it's office visits or prescription drugs and it's all related to health care services. But I don't see how that would limit it, right? Because if the rates went up 100% rather than 17%, and 92% of it or whatever was still going to pay the providers, that's not like a limiting factor in what is or is not affordable. Like the percentage of money that's going to the providers doesn't change whether or not the people paying it can afford it. Not from the lens of the consumer, but if we go the other way around and you, there is no increase or they get reduced, then our ability to pay the provider is limited. And so would that be affordable to then turn around and limit payments to providers? So it's that lens that I'm trying to include in here. So in determining affordability, you think the board should consider the ability for providers to be paid? That money that is paid by the consumer is revenue to the providers. In coming up with the framework that you think the board should consider, did you discuss this framework with anyone? Discussions, but I think this is a broad sort of policy discussion that would mean many, many stakeholders. Did you review any literature on affordability in forming this framework? Are there any sources that we could look to that support the framework that you're suggesting? In thinking about affordability, are there any levels that you would find to be not affordable? So this rate, your testimony is, in your conclusion, it is affordable, correct? Are there any rates at which you would find the rate to be not affordable? You know, and I have to put that lens on it too. If rates were also deemed excessive, I believe those rates would not be affordable, but these rates are not excessive. Because I read the statute, I don't really see them as separate elements, not excessive and affordable or separate elements. It sounds like you're collapsing affordability into excessive. I think they're different. You disagree? Think of it, but again, there is no definition of affordability in the statute, so there are many definitions or lenses we can put on it. I just want to make sure I understand the answer on this specific question. Can you conceive of any rate here that you would find not affordable? Our increases were higher and they were not, you know, actuarially justified, then I believe those rates would be excessive and therefore unaffordable. I think in the opening statement, there's some reference to the federal subsidies and their impact on affordability. Do you agree as a witness that the federal subsidies play a role in evaluating affordability of the rates? Can you describe your analysis of how those, if you have one, or just your view, if you haven't had formal analysis, but describe to me your view of the impact of those federal subsidies on affordability. The federal subsidy program casts the amount of the percentage of income that can be used to pay premiums, and the remainder is subsidized by the government. And so I'm assuming that in setting those levels, there is a lot of work done and analysis done by the federal government to set the percentages at the ones they set. Do you think the rates in the individual market would be unaffordable if there were no subsidies? Low income, they would have to pay a large portion of their income on premium, and that would be beyond the threshold that under the subsidies is considered affordable. But as you conceive of affordability and as you think the board should conceive of it, do you think removing the subsidies would make the individual rates that you're proposing not affordable? Without subsidies for members that currently receive subsidies, it would be very difficult to afford those rates. And in evaluating affordability, do you think the board... I'll ask it this way. When evaluating affordability, do you determine or consider the amount of money that people have available to pay the rates? Of members. When I've developed rates, I look at what the expected cost will be for 2024. So is there any limiting element to the amount of money that people have to pay the rates in considering affordability? Is that a lens that can be put on the definition of affordability? Is that a lens the care board should use, in your opinion? It's a hard time answering these questions. I am probably not the best place to tell the board what you should and should not consider in your decision. Sure enough. But it's Blue Cross's position that these are affordable, and it's your position, and I want to know whether or not you think... Did you consider the amount of... Sorry, you already testified to this. Your testimony is that Blue Cross did not consider the amount of money that members have available to pay for insurance in determining these are affordable. Is that right? No, we are... That's right. We are thinking about the alternative of these rates for these members that need the care they need. And for members that are incurring hundreds of thousands of dollars in care, that's why we're here. That's why the insurance is here. And on the community level, these rates are affordable. I think the health care advocate in their opening suggested that these rates would be a quarter of the median income for a Vermont family. Do you think we should consider that in evaluating the affordability element of this rate? To make sure that when we think about these rate increase, these rates and their affordability, we remember what they pay for. And if a quarter of these rates is what we can pay out, that should be part of the story. Can I go through a couple things to ask if they were considered in the determination by Blue Cross that these rates are affordable? Was there consideration of household income? You said no. Was there consideration of state GDP? No. Was there consideration of increased taxes that Vermonters are paying? Are these rates affordable? Was there consideration of Vermont insurance premium costs versus other states? In terms of... I mean, one of the things as a care board member that I think about is, over time, what these rates do, right? Because is it your understanding that Vermont wages are not keeping up with the rate increases that are being requested for health insurance? Do you have a sense of how much Blue Cross is a small individual group? Insurance rates have gone up over the last five years. But we can get that information. My understanding is it's somewhere in the magnitude of, with these rate requests, over 40% approaching mid-60s, percent increases cumulatively. Does that sound directionally correct based on your understanding? What is the health care cost trend that we're seeing? And projecting out if those rates continue at that level and wages continue at this current level, right? If these trends continue, would that impact your view of affordability? Because I keep my view of affordability in what's my alternative. And as long as the health care prices keep growing higher than wages, then the insurance is still a better alternative than to go and risk having a high cost of that happen to you and having to pay for it out of pocket. How do you think the care board should reconcile Blue Cross's view? And I appreciate that, and I recognize that these questions are not, I don't think this is all Blue Cross's problem in any sense, like at all. I don't mean to suggest that because you are paying out the vast majority of this to cover the claims, which is what you're my insurance company. That's what I want you to do when I have claims. It's what I want you to do for everybody. So I recognize this isn't Blue Cross taking money. It's Blue Cross taking money to pay the claims that needs to be understood and is the context. So these questions are somewhat going towards the inputs into those costs. It's not to suggest that you're doing anything wrong. But how do I square your testimony that these rates are affordable with the volumes of public comment saying that they're not? Kind of take us back to earlier this morning when we were talking about the distribution of care, right? And we have every year one to three members who have over a million dollars of claims, right? And we looked at the bar chart that says the average per member per month's claim in the individual market was $875, right? And I did that, Matt, recently. So it might still be, you know, right in my brain. But for one member who has a million dollars of claims, you need about 1,200 members who have no claims but pay their premium. And so we need to look at it on the community level, right? This is community rated. We have members who will go years without any claims because they have good health. And then one year, you know, they will be the one who will need to have the very, very high claims. And they're going to be the ones who need their community, all the other rate payers to pay into the system, have no claims for them to have all their claims paid for. And so it is difficult to reconcile all the comments from the thousands of members who don't need the system. But we also need to remember the very, very few who need the system a lot. And we are there for them as a community. And that's how I reconcile those two. In your view, does a cost of insurance impact whether or not people purchase insurance? And in your view, does the cost of insurance impact the level of insurance that people purchase? So thinking of the alternative, right, that you were suggesting in terms of purchasing insurance, wouldn't it be better in that context to purchase insurance that provides more coverage? Expensive on a monthly basis, but would reduce your out-of-pocket at the time of service? You'd make the alternative better, right? Like if you have the downside of having an issue, which God forbid no one has, but it happens, your alternative is better if you purchase more expensive, a higher level of insurance. So doesn't the cost of the insurance going up have a negative impact for Vermonters because they're purchasing lower levels of insurance due to the cost? Full of benefits. Then their exposure in the event of a claim is higher, yes. So from a community perspective, don't we want people purchasing higher levels of coverage? Equal, maybe, but what's difficult is that some members might not have chronic conditions that require regular care or, right, so they're buying the true nature of insurance, which is to cover you in the event of a catastrophic, unexpected event. But what these rates also cover is ongoing care for chronic conditions, so not everyone's situation really is, can be put in just one single place. I think the reason they're a different metal level is that they're a different situation where members find themselves and they can find kind of the balance for them of the lower monthly premium and then the higher out-of-pocket in the event of an event that is unexpected versus having the higher premium but then known cost when they incur services that they expect to have. At Blue Cross, are you seeing declining membership numbers in your small and individual group products? So we saw a growth in membership in January of 23. And I did look recently at our June enrollment report and the individual market is growing and the small group market is staying pretty stable through June of 23. To what do you attribute that growth? As our rates became closer with the competitor in the market and that members just chose to move from MVP to Blue Cross. And in terms of the distribution of metal level amongst your members are you seeing any variance in that year over year? I know we answered the question so if you give me a moment I'll find the numbers provided in this table the change from December of 2022 to February of 2023 and to create this table we line up members and look at what they did for who were enrolled in December and were enrolled in February remain in the same metal level and then we have that decided to buy a leaner product. So to buy down to a leaner product. So relatively flat? It is. It has been relatively flat over the years. Just a couple of quick questions on the 340B issue that members Lunge and Merman were discussing. It sounds like how that sugars off is that the insurance company Blue Cross is not getting these rebates and because Blue Cross isn't getting these rebates members have to pay more money. Is that fair? I mean to some degree. That fair, yes. And instead of Blue Cross getting the money and members getting a lower premium that money is going to the hospitals instead. Yeah. And so isn't that effectively really just having the members pay more money to the hospitals just through a different mechanism? Yeah. I'm not sure if you're the right witness, but if you are, you can try some of these. It's about distributing pay parity amongst the different providers that are in your network. No questions. Okay. I'll wait for him. On promoting access through these rates. What are the facts that support a conclusion that this rate promotes access? All of the details. All right. I think I have nothing more and thank you for sitting through all of our questions. I really appreciate it. Thank you. Mike, I have one follow up if I could just quickly ask it. Yeah, go ahead. Thank you. So included in your rate is a fee for the Vermont Department of Health vaccine program. Is that correct? Have you had any communication with the Vermont Department of Health about whether or not COVID vaccines will be included in that program in 2024? COVID vaccines for members under age 65 are included in the program for 2024. Okay. And so in your detail that you provide us breaking out the COVID costs. Could you highlight what I'll call an offset that shows that those costs are not included there? So in our experience period 2022 for the COVID vaccines, right? Well, first, we don't have all of the data, right? So we only if you receive your vaccine through a state sponsored testing area, a vaccine area, or so we don't have all that information, right? In the medical place. And we included the components that we had, which is only the administrative costs, right? Because the vaccines were still funded. On the medical side, we have a few vaccines in there with the $40 cost. And then there are some vaccines coming through the pharmacy benefits. My understanding of how everything is going to look in 2024 is that there will be a ingredient cost to the vaccine, right? I believe it's around $100, $130. But Blue Cross will incur if the vaccines are not purchased through the vaccine program. If the vaccines are coming through the program, there will be no cost. And then if members go and have their vaccines at pharmacies, that cost will still be included. Because my understanding is that not many pharmacies participate in the vaccine program. So we decided to use our experience period, which has limited data and only the administrative costs of the 40% as our projection going forward. That would be is our expectation is that that will be very similar to the mix of vaccines will be seeing either purchase through the vaccine for my vaccine program or coming directly because the providers are not participating. Okay, I think it would be helpful for you to include that explanation when you include the breakdown that that that board member Merman asked for. Just to be clear in terms of where the different funding sources for the vaccine is included in the filing. Thank you. Okay, Mr. Jennifer, any redirect. Any questions if I may. Thank you. Miss Lemieux, I just want to return to a bit of the fascinating colloquy that you had with chair Foster on affordability. So the point of developing a rate is to, as best you can predict the health care costs of the relevant population and the cost of providing that insurance to that population, right? That's right. And then you you design a premium that's intended to collect as close to that amount of money as possible, right? That's right. In that process, is there any way to factor in the the specific financial situations of the people who make up that population? No. So is there any way, for example, to factor in their, you know, their income? No. If if you were to go through the rate development process that you described, arrive at a rate and then decide to cut, let's say, 10% out of that rate and put that rate into the market. I'm sorry, strike that that was very confusing. What's the actuarial definition of an inadequate rate? It's a rate that is does not cover the cost of health care services, the cost of administration of the insurance and a small contribution to reserve. What would happen if Blue Cross were to put an inadequate rate into the market? It would be detrimental to our reserves. And can you just explain what you mean a little bit by that? So if the rate is lower than what we have to pay out, excuse me, to providers, we still have the obligation to pay the claims. So we would have to use our reserve to fund the remainder of that missing. Thank you. Mr. Hearing Officer, could I have one moment to consult with my colleagues just to make sure I have nothing further for redirect? Yes. Why don't we... I don't need a break. I literally can just take one minute. Oh, yeah. Of course. Thank you. Further. Thank you. Thank you. I did just want to give Mr. Becker any questions on that limited redirect? No additional questions. Thank you. And anything from the board? Okay. Thank you, Ms. Lamu. I do expect an executive session later, likely after... I'm not sure if it would be better after Ms. Green's testimony or Dr. Weigels. But if you could please stick around for that. Just on that point of where to place the executive session, we're very flexible. We'll do it whenever it makes sense. I imagine that both Ms. Green and Dr. Weigels may be asked questions that raise confidential topics because of the nature of their subject areas. So it may make sense to do one after the direct of those witnesses, just the thought. Okay. Thank you. So Blue Cross can call their next witness. Hearing officer, would it be any trouble if we took a quick comfort break? Oh, yeah. Of course. No worries. Why don't we come back in five minutes? Before we break, my understanding was that the next witness, Ellen E, was going to be the next witness that we had decided to sort of group the witnesses by... topic area. If that works. Yeah. No. Thank you for reminding me the difference between MVP and Blue Cross. Laura, is that still sound good? Yep. That was our expectation too. Sorry for forgetting. Why don't we come back in three minutes or so? Thank you. Thank you. On the record, hearing officer. Thank you. So the next witness is Kevin Ruggerberg. Kevin, if you could please raise your right hand. I'll swear you in. You solemnly swear that the evidence you shall give relative to the cause now under consideration shall be the whole truth and nothing but the truth. So help you guys. I do. Hey, Miss Belova. Morning, Kevin. Morning. Could you please state your name for the record? Kevin Ruggerberg. And where do you work? Louis and Ellis. And what is your position there? I'm the vice president and senior consulting act short. Great. Could you please turn to exhibit 21 of the binder? Yes. Do you recognize exhibit 21? I do. Can you briefly describe what it is and what's contained there? This is my pre filed testimony. It contains a description of my educational and professional experience as well as a description of Lewis analysis review of this filing. Is the information in this document accurate and correct to the best of your knowledge? It is. Is there any information in this document you'd like to change or clarify at this time? No. And do you wish to adopt this pre filed testimony as part of your testimony today? I do. Can you please explain your role in Melanie's review of Blue Cross, the shield of Vermont's individual and small group filings? Yes. I work closely with another actuary at Lewis and Ellis Jason Dougherty to perform an initial review of the materials submitted by Blue Cross in order to determine what facets of their submission are either inadequately documented or which we have concerns might be unreasonable. We then submit questions to Blue Cross to seek clarification or further documentation on those items. And then we work in concert with Jacqueline Lee and Tracy Lee or Tracy Hughes, sorry, both actuaries with Lewis and Ellis to ensure that our review of the market as a whole is consistent and similar across all of the carriers in the market. We then determine any recommendations that are appropriate on these filings and draft a report, one for individual, one for small group, which we then submit. Great. And those are the day 60 reports? Correct. The report for the 2024 individual rate filing is exhibit 14, and the report for the 2024 small group rate filing is exhibit 15. Can you please turn to those exhibits? Up to here, yes. Do you have any changes you wish to make to either report at this time? No. Can you explain your standard of review in both filings? Yes. We review the filings to ensure that the proposed rates are actually sound, not inadequate, not excessive, and not unfairly discriminatory. Do you review for affordability in either filing? No, we do not. Why is that? Because it is not an actuarial issue that would fall within our area of expertise. Using your methodology and standard of review, did you make any recommendations to modify this proposed filing? Yes, we did. Can you summarize those for me? Yes. We recommended that the, so I want to make sure I don't miss anything, so I'm going to pull up that section of our report. We recommended that the updated hospital budget information be considered because the board will have more information at the time of their decision than we had available to find the report. We recommended that the risk adjustment transfers, assumed in the development of the rates, use the final 22 numbers rather than what was estimated by Blue Cross at the time of submission. And we recommended that the benefits where they had to be modified for IRS limitations on high deductible health plans be reflected in the rates rather than the original benefits that were reflected in the initially proposed rates. Great. And can you do the amount by which you recommended the rates in each filing be adjusted? Yes, we recommended that the rates be adjusted by 17% in the individual filing and 17.7% in the individual filing and 16.5% in the small group filing. Those are of course caveated by the unquantified recommendation about hospital budgets, which we couldn't quantify at the time. So can you tell me the total amount that you recommended, the total percent increase recommended in the individual filing? I believe it was 17.7%. Okay. And can you tell me why you find that reasonable? Yes, we reviewed the various components of cost that Blue Cross is projecting for 2024. We found all of those reasonable when adjusted as I have described. And that reasonable premium is 17.7% higher than the premiums approved for 2023. So the 17.7% is reasonable as a result. And can you tell me the amount, the total amount percent increase you recommended in the small group filing? 16.5%. Can you tell me whether you found that reasonable and again summarize why? Yes, we reviewed the costs projected by Blue Cross and found them to be a reasonable estimate of 2024 costs. The premiums calculated in order to be adequate to cover those costs are 16.5% higher than the 2023 approved premium. Therefore, I find the 16.5% reasonable. And have you reviewed the other pre-filed testimony in this proceeding? I have. And have you listened to the testimony today so far? I have. And you mentioned your hospital budget recommendation and having reviewed the pre-filed testimony and listened to the testimony today so far. Do you wish to amend or add to L&E's recommendation about updated hospital budget information? Yes. Based on the pre-filed testimony from Ms. Bresson Lemieux, it appears reasonable to me that the modifications she calculated would reasonably reflect our recommendations. And so I think that is consistent with our recommendation. In terms of the updated risk adjustment transfers, having reviewed the pre-filed testimony and listened to the testimony today so far, do you wish to amend or add to L&E's recommendations about risk adjustment transfers? I do not. And you mentioned your recommendation concerning updated benefit designs for the high deductible health plans. Do you wish to amend or add to L&E's recommendation on the updated benefit designs having reviewed the pre-filed testimony and listened to the testimony today so far? I do not. I want to ask you briefly about membership movements and resulting silver loads. Can you please discuss your position having reviewed Ms. Lemieux's supplemental pre-filed testimony and live testimony here today on updated assumptions? Yes. L&E found that what was initially submitted by Blue Cross was reasonable as we stated in our report. I also believe that the modified proposal from Blue Cross as presented in pre-filed testimony is also reasonable. And if the board accepts Blue Cross's proposal on membership movement, can you tell me what the ultimate rate impact in the individual market would be? Yes. 18.0%. And would the small group rate increase be affected? Not by the membership movement, no. Thank you. So after reading the carrier's pre-filed testimony and all the materials that have been submitted so far in this filing and then listening to today's testimony so far, is there anything you wish to add or change to your recommendation regarding the carrier's proposal regarding membership movement assumptions or to the three recommendations for the individual and small group filings reflected in your report? No. Your recommendations as of today are implemented. Do you believe that rates would be excessive? No. Do you believe they would be inadequate? No. And do you believe they would be unfairly discriminatory? No, I do not. Thank you. I have no further questions at this time. Thank you, Mr. Donafio. Any questions? Thank you. Good morning, Mr. Ruggerberg. Nice to meet you. Nice to meet you. I've seen your name many times. I think this is our first face-to-face. Good morning. I apologize. I can understand you, but just barely. So I apologize. I might have to. Is that any better? I'm close to the phone. Okay. Sorry about that. Thank you. Could you please turn to page 16 of exhibit 14? On that? And do you see towards the bottom of the page, that's the beginning of Lewis and Ellis' assessment of Blue Cross's proposed administrative cost? I do. What did you conclude with respect to the proposed administrative cost? I concluded that they are reasonable. And did you conclude that they should be changed in any way? I did not. As part of your analysis, you did some comparisons between Blue Cross and other insurers, right? Correct. What did you conclude based on that comparison? Blue Cross Blue Shield of Vermont's administrative costs, both on a PMPM basis and as a percentage of premium, are lower than the average for individual and small group carriers nationally. And you also concluded that based on that information, that it appears that Blue Cross Blue Shield of Vermont manages and limits administrative costs better than the typical health plan nationally, right? I did. And I'm now on page 19, section 12, Changes in Contributions to Reserve. I'm not. You analyzed that, sorry, you analyzed that component of the rate as well, right? Yes. And also concluded it was reasonable. Correct. And that no changes should be made to that component of the rate, right? I did not recommend changes, correct. Thank you. Could I now move over to Exhibit 20, which is Miss Lemieux's supplemental pre-filed? Yes. And if you would turn to page three. Okay. So I've had a Pat line, like 11 and a half, because I realized the text doesn't perfectly line up with the line numbers. There's a question there. Do you plan to make any other changes to the proposed rates? You see that? I do. And then the testimony there is about adjusting the rates in light of some actual negotiated contracts with some hospitals, right? Yes. Did you consider whether that change was reasonable or not? Yes. I do find that reasonable. Thank you very much. I have nothing further. Mr. Becker, any questions? Yes. Hearing officer, I have a few questions. Mr. Ruggaburg, nice to meet you. You as well. Thank you. I'd like to start on your memo. So that's Exhibit 14 and Exhibit 15. So you submitted two memos, an individual and a small group where there's a difference between the two. I'll try to point that out. So this is an occasion where what I'm pointing out or what I want to ask about is the same. So Exhibit 14, page seven is where I'd like to direct you. Sure. Okay. And there's a box on that page about the GMCB hospital budget review. And you know under bullet two that there's a trend of 6.2% for other medical facilities and for providers that are not subject to the hospital budget review. And then right next to that box, the third bullet point down, you say that you know that Blue Cross relied on a confidential Blue Cross Blue Shield Association trend survey to derive some of that 6.2% trend. Is that accurate? It is. Yes. Okay. Were you able to review any of that survey? No, I was not. Okay. And you're still then able though to say that that 6.2% trend is reasonable. Yes. Okay. All right. On page 10 of Exhibit 14. Okay. Could you read the last two sentences under the there's a little chart at the top of the page, the last two sentences, last two sentences in that paragraph, beginning with in aggregate. In aggregate total utilization shows a slight decrease from 2021 to 2022. These data suggest two plausible interpretations. Okay. And then you go on to provide the two plausible explanations, which are what that medical utilization trend is zero or slightly negative. That was one of them. Yes. And the other one was that the continued positive trend masked by random fluctuation or artificially inflated 2021 claims. That was, could you, could you state what that? Let me, let me restate that please. So, there is an inherent challenge in studying this really isn't limited to health insurance or anything, studying the sort of data where there's an evolution over time. Because, of course, in reality, any number of things, effectively an infinite number of forces are impacting these impacting these things year over year. The task of forecasting therefore involves trying to decompose that historical change into long term patterns and short term patterns. There is never a perfect end to that process. There is always some ambiguity. And it has exacerbated that dramatically because in effect the very short term is arguably dominated by COVID such that long term trends are difficult to see. It has, I think, consistently been our position that one of the better ways to look at that is to look at the most recent data we have relative to pre COVID numbers to as much as possible, not look at data that is heavily influenced by COVID. When you do that, the overall medical trend that would be implied is about 2% on average over the three years between 2019 and 2022, which is notably higher than what Blue Cross has assumed. There are certainly actuaries who are of the position that that number or something higher is what would be assumed here or what should be assumed here. It is, of course, difficult to know with certainty that 2% is part of a long term trend which extends both back to 2019 and forward to 2024. Nobody can know that with certainty. So it is possible, and I think reasonably likely that it is, part of a trend which was generally increasing costs over the last several decades. There has consistently been a pattern of increasing costs. So it is possible. One very reasonable interpretation here is that what we're seeing coming out of COVID is that when you remove those aberrant years that we're seeing a continuation of that trend upward. You couldn't look at this data and say that 2022 was mostly after COVID and therefore, Well, you would have to go back really to 2021 and argue that 2021 is already sort of post COVID and then say that the gap from 2021 to 2022 shows a negative trend. That is a thing to consider, but I don't think that that is my default assumption about what's going on here. So what our report attempts to do is acknowledge the fact that there is no one way that you can look at this and definitively know what's going on. But that the two answers, the two kind of extreme answers you might give would suggest a plus two or a roughly zero. Thank you. That was very long winded. And you're illustrating why you on cross examination, I should stick with yes, no questions, but so Blue Cross did not select a 2% positive trend. You say that they selected the positive point eight and that that was reasonable in the aggregate. But to back up, you provided two plausible explanations and one of those plausible explanations right was that medical utilization trend is zero or slightly negative. That was a plausible assumption. And that's what you wrote. Is that correct? Correct. Okay. All right. So I'm going to move on to pharmacy trend. I'd like to ask you a couple of questions about pharmacy trends. So in your memo, that's at the bottom of bottom of page 11. You start talking about pharmacy trends. You say that for the most recent three years utilization trend for non-specialty drugs shows increases of 4.4%, 2.1% and 2.0% respectively. And is that what you said? That's at the bottom of the page. Correct. Could you read that next sentence crossing over onto page 12? It's fairly stable level of increase supports Blue Cross Blue Shield assumption that it is a trend which will continue into the future. And Alan agrees that an assumption of 2.0 for the next two years is reasonable. Okay. And I'm just sort of clued in here on that language you used fairly stable, but it is down really more than half over three years. So it starts at 4.4 and at the end of three years we're at two. So that's a downward trend of more than half. Is it not? So you're talking about a second order trend. I don't like the phrase downward trend there. It's not accurate. Utilization is trending upward and has in each of these years. The trend in the trend, such that I believe this is a trend and I'm not sure that I do, right? A trend in a trend. The trend is, you know, slightly lower in the third year than the second year and notably lower in the second year than the first. But there is not a downward trend in utilization. There is an upward trend in utilization. That makes sense. Thank you. I'm going to skip ahead to specialty pharmaceuticals, which it looks like. Well, so there's this chart right here on page 11. And if I'm reading this right, specialty drugs make up a 65% of Blue Cross's spend on pharmaceuticals. Is that right? I believe that's approximately correct. Is that number on the page somewhere? It's in this chart that's right in the middle of the page and the last row before the. Yes. Totals. Yes. Then yes. Okay. Blue Cross selected a 19.5% per year trend for specialty pharmaceuticals, right? Correct. And that is higher than the last two years of trend. Is that right for specialty pharmaceuticals? I don't believe that's true. No. So if I look at the next page. Yep. There's a table which reports the 2022 versus 2021 is being 23.0, which is higher than 19.5. I think what I meant to say, it was higher than two of the three last years. That is correct. Okay. Yes. Thank you very much. That's what I meant to say. And it's also higher than the three year average. Correct. Is that correct? Okay. And then you go on to say here on page 12 that Blue Cross arrives at this 19.5% by considering the average of three regression methods. So that's in the second paragraph below the little chart. Correct. Correct. And that two of those three regression methods consider 21 and 22 data. So the, is that correct? Correct. And that the third method considers all three years. Correct. Is that correct? Correct. And then so you point out then that their 19.5% trend is based on, 80% based on the highest year over year, the highest 80% based on the one year change from 2021 to 2022. Correct. And you take issue with that approach. You say, while Eleni does not necessarily agree with Blue Cross, Blue Shield of Vermont's decision, is that right? Correct. Okay. And if you could read that last sentence in that last full paragraph on the page beginning with so while other specialty trend assumptions. So while other specialty trend assumptions would potentially be appropriate, Eleni believes this is a reasonable assumption based on recent trends and particularly the volatility observed. Okay. I'm just curious what some of the other reasonable assumptions might have been. Would the three year average of 14.9% have been reasonable? I apologize for a potentially long answer here, but there's a nuance to answering that that is unfortunate. So actuaries must consider not only whether each individual assumption is reasonable, but whether the assumptions considered in aggregate are reasonable. As I believe I alluded to before, I think the most natural thing to be doing here, given the volatility from COVID is probably to be looking at effectively the three year average here. That is probably what I have a pricing actuary would have done in their shoes. And I would have done that across the board. So I probably would have calculated a higher medical trend number as well. So if I were to say it is reasonable to use the three year average specialty, it would be inappropriate for me to not say that consistently they probably should have used a higher number of medical. Fair enough. So in isolation, the answer to your question is yes, but within the context of the rest of the report, the answer is actually no. Okay. Thank you very much. If you could turn to the next page in your report page 14. There's a section seven that begins on that page changes to other factors. Yes. Now, there's a whole slew of things that are lumped together into this change to other factors. It spreads across two pages. But the end result is that due to these other factors, rates in the individual market increase 5.3% and rates in the small group market go up 3.9%. Do I have that right? I'm not looking at the 3.9, but the 5.3 is certainly accurate. Okay. And I mean, if you could just flip over it would be page 14 of your exhibit 15 as well, just to get both those numbers confirmed. Yes. 3.9. Yes. Okay. And I'm not going to go through all of these other factors. But it looks like you said here in the second paragraph under non-systems claims, it looks like you said that the primary driver of this change is the reduction to pharmacy rebates. Do I have that right? Yes. Could you read the last sentence in that paragraph beginning the impact of these drugs? The impact of these drugs no longer producing pharmacy rebates was calculated by Blue Cross Blue Shield of Vermont as increases of 1.5% and 1.2% for the individual and small group markets respectively. Okay. Did you ask Blue Cross to provide any support for this in any of your objections? No. Okay. So you were unable to independently verify or validate these calculations. Is that correct? That is correct. Okay. How many other of these miscellaneous items adding up to 5.3% individual and 3.9% small group increases. Were you able to validate with information that Blue Cross provided? That might take a second to answer. So there are several of the items within non-system claims that I believe the assumption is effectively they will be unchanged from the base period. And so certainly within our review, we do not audit whether claims about the base period experience are true. So I mean, I'm not able to independently verify, for example, how much money was paid by Blue Cross to a vendor. But to the extent that I can trust that those numbers are true, and I generally do, I believe I was able to independently review those numbers. The changes to ARPA is really, that's not actually contained within this filing. It's about the removal of something in last filing. We certainly independently reviewed that number. We reviewed the COVID adjustments both within this filing and last filing. We were provided data on the cyber attack impact. We were able to perform a limited review of the catastrophic claimants. I believe we have some numbers on the non-essential health benefit claims. And without reviewing the filing, I would have to go back and look at exactly what's contained in the changes in provider networks. So I'm not entirely sure if I know the answer to that one. Okay. I appreciate the response. I mean, I'm asking, I think just because, you know, it's labeled other factors, but it adds up to a significant amount of the increase. Does it not? It does. Okay. All right. And so I appreciate that. It was nice to meet you, Mr. Ruggerberg. I have no additional questions. Okay. Thank you. What number of letters do you have questions? Just a couple. Hi, Kevin. Hope you're well. Thank you. So as you testified earlier, it's your job as our actuary to review the information that you have available for reasonableness. Is that a fair statement? That doesn't mean that there aren't other reasonable assumptions, other assumptions that you would have determined were reasonable. Is that right? That is correct. Okay. Thank you. That's all I have. Remember homes. Yeah. Hi, Kevin. Hi. Just a quick one. And this relates to some of my earlier questions that you may have heard about COVID. So given the huge spike in the COVID rate at the start of 2022, both nationally and in Vermont. And it's precipitous decline both nationally and in Vermont since then, as well as the market decline in hospitalization and ED visits since early 22, at least nationally, as tracked by the CDC. In your opinion, is it possible that using 2022 COVID experience to project or to mirror, to assume that 2024 COVID claims will mirror 2022 claims. Is that likely to overestimate the 2024 COVID costs? Given what we know now about what's happened to COVID. So. My answer to that question is that. The pattern with COVID. Really for most of the time has been. Peaks and troughs. And coming in waves, right? We have understood the history of COVID in terms of the pandemic. I will, I guess, prep is my response by saying that there is a good deal of disagreement about this between actuaries. But. It is my concern that to view the entrance to or exit from those peaks as trends and projecting them forward. Doesn't necessarily capture. What does that actually look like? So. To assume. For instance, as you described earlier, to take the first part of. 2022 and ignore it because it was a peak and rely on the latter half of 2022, for example. Would in effect assume that there will be no future waves. Which is an assumption that I'm not sure I find reasonable. I think that's a good question. Your question directly. You said, is it likely that it will overpredict cost? And I think the answer is. Yes, when understood that way, but relative to the average expected cost, I think it is probably appropriate. And the average outcome. Is what should generally be reflected in insurance rates. So it is also likely that COVID costs are substantially lower. Is the, is the, are those peaks and troughs where they all contained in a public health emergency? I believe that is true. Are we, are we in that public health emergency any longer? No, we're not. Is if you took the average expected cost using 2022 alone. And compared that to the average expected cost inclusive of 2023. Treatment costs for COVID. Do you think that average expected costs would be lower? If you included 2023 data that we have to date. Or. COVID costs. Yes. So wouldn't you want to use the most up to date accurate information that you have to project. 2024. Which would be inclusive of the claims experience, which continues the decline from 2022 in your estimates for what's going to happen in 2024. Because also we're out of a public health emergency. Yes. But. So. My discomfort with that arises from things like flu cost, which have already been mentioned today. Flu was very low in 2022. And that might well be related to COVID. I don't. I have concern about. Adjusting the experience for only one aspect of COVID's effect. Being the direct COVID costs and not potentially the other ramifications. So. During the period when COVID was so high, there were other things that were abnormally low like flu. So I. That's the source of my hesitation there. 2023 data is certainly more. Up to date. It is also limited in its accuracy due to the run out issues. So. If the most up to date data was the most accurate data, it would certainly be the best to use. Unfortunately, that's rarely the case. It's all my questions I have. Thanks. For the moment. Hey, Kevin. I just have a couple of questions for you. On. The term reasonable. We tend to all use specials T specific field specific language. And there's different meanings outside the field. I use the word sick in my field. I need to be very careful that I don't use sick when I'm at home because when I'm talking with my intensive care colleagues and use the word sick, I'm meaning gravely ill and when I'm at home and my kid as a sniffle, I use the word sick. Could you define how you use the word reasonable? I will. I will attempt to do so succinctly. I should have put that caveat in there. Yeah. So. Actuaries are inherently dealing with. The nature of our. Of our work. And. Each actuary will generally. Have a different interpretation of the available data. And so there is. Uncertainty that each actuary will acknowledge in addition to uncertainty between. Actuary variation and expectations between actuaries. When reviewing a filing. Reasonable is generally going to mean. Consistent with the available data. With. Some consideration to whether is likely given the. Available data. So generally when we're referring to something as reasonable, we are saying that we think it is near the most likely value. Given our understanding of the data. So different than how reasonable might be used. Kind of colloquially. Which. Would I think more of sort of thought of as extreme or excessive. Using it more in the term of sort of logically. Valid. Correct. I think that's a very good distinction to draw. I'm using it in the sense that it is reasonable given the circumstances of this filing. It is not a statement about whether the circumstances of this filing are reasonable in a more colloquial sense. So when you would say that. That the rates are reasonable. They're reasonable based off of the inputs into the rates. Correct. And when you review the inputs into the rates say like the same thing. You're looking at. Are you my impression is you're looking at the available data say from the possible budget submissions. Correct. But are you evaluating whether or not the hospital budget submissions are reasonable. I am not. Okay. That's all I have to ask. Thanks. I don't have any questions, but thank you for your work on behalf of the board. It's my pleasure. Miss Bella when you redirect. May have one moment. To check. I believe we have no further questions. Thank you. Mr. and offer you there was quite a bit of ground covered there between the start and the finish. Do you have any additional questions for Mr. Ruggaburg before I let him go. I don't. Thank you. Okay. So given the time I. My preference would be to try to push through. Ruth greens direct testimony and then break for. Lunch. Does that sound. Beasible to do before. We have some constraints. I think. Before like one 30. Get through that before one 30. I'm sorry. Hearing officer Barbara are you asking if we would get through Miss greens a direct testimony before one 30. Yeah, I figure we should get through our direct testimony, take a lunch break and come back and do. To the cross. Yes, we can. We can finish the direct before lunch. Blue Cross will need a short break because we need to get through our direct testimony. Okay. Five minutes at the most. If we could have that. Hearing officer. Yeah, why don't we. Come back at 1135 and. Take Ruth greens testimony then. Thank you. Thank you. Thank you. Off the record. On the record. And we'll take the testimony of Ruth green. Thank you. Could you please raise your right hand and I'll swear you in. Do you solemnly swear that the evidence you shall give relative to the cause now under consideration shall be the truth. And nothing but the truth. So help you God. Thank you. Mr. Barbara would you please again say your full name for the record. My name is Ruth green. Green. I'm hold the position of treasurer and CFO. Did you prepare and submit pre filed testimony in this proceeding. I did. Incorporated exhibit 19. Is the testimony contained in exhibit 19 true and correct to the best of knowledge. Yes, it is. The screen. Did you direct Blue Cross is actuarial director to include a pre filed testimony in your pre filed testimony. Yes, I did. What CTR did you direct. 3%. Have you explained the basis for a 3% CTR in your pre filed testimony. Yes, I explained the basis of a 3% CTR in my pre filed testimony and also in attachment C to the filing which is incorporated. Also in my pre filed testimony. Would you please briefly come up the main reason for requesting a 3% CTR in the market. Sure. There's. Four main reasons I'd like to. Summarize. One is the. Blue Cross is member reserve are below the level. Required to support an RBC. That is in the. Range ordered by the Department of financial regulation. Secondly. The reason for a 3% CTR. Is that Blue Cross has a number of financial headwinds. That we continue to navigate the main one being. We're in an environment of increasing. Pharmacy and medical trends increase fast. Fast increases in those areas which is. As we determined earlier. In this hearing is a. The majority of the premium rates. We also. Other financial headwinds include uncertainties in. Both the markets and the economy in general. And an overall. Inflationary environment which. We have to navigate like. Others in the Vermont. Business community. Another reason for the third. Reason for a 3% CTR is that we have had. Weathered recent losses. Operating. Market losses. Two. That have reduced. Member reserve to a level. That. Brings our. Our most recent RBC reported to a new low. And. Most importantly. Lastly. And most relevant here. Is that the. ACA individual and small group. Segment. Has not realized. CTR. To the minimum. Level of. One and a half percent in recent years. And we need to increase the likelihood. That the premiums that we charge are fully funding. The maintenance of reserves. Great. Have you explained what member reserves are. And why they are important. Yes, I explained. The member. The importance of member reserves in my. Prefiled testimony. In. Also in attachments. See. That's included. Therein. But just to summarize real briefly. The importance of reserve. Is. That. Blue Cross is obligated. To pay our members claims. No matter what. And. We. Do have to estimate. Well in advance. As we've been talking about in this hearing. What those claims might be. And so we do need to have. Those reserves. To cover the unforeseen circumstances. And protect our members. In the case of having to pay. Claims. No matter what. We also. Have. An important. Purpose of reserve. Is to provide. Solid financial foundation. To. Invest in things. Like. The. Unforeseen circumstances. And. Protect our members. In the case of having to pay claims. That. Is. To cover. The unforeseen circumstances. And things like membership growth. Membership growth requires. Additional reserves. We also. Our mission. And our role in Vermont. As a single state. Blue plan focus just on Vermont. We want to serve. More. And more. Femonters. And which requires entering new markets. And then we also. Require. that will continue to allow us to improve access to care, quality of care and also invest in capabilities that our customers require and many of those capabilities will also help us lower the cost of care over the long haul. So, reserves play a foundational role in all of that. You mentioned supporting membership growth. Could you explain to us why growing membership draws on reserves? Sure. Membership growth draws on reserves because every member that joins our roles when we enroll a new member, we're making a commitment to pay their claims no matter what and as Martin testified earlier today, sometimes members don't incur the claims that the average premium covers and many times members incur significant claims over that average. So every time a member comes into our enrollment and we grow membership, our reserves are taking on that additional risk. And so in the near term immediately when that member joins Blue Cross, we have the risk but we only have the contribution to reserve to accumulate over time as that member stays with us that will ultimately maintain the reserves in a place that allows us to take that risk. Membership growth is a very important point because in order for us to grow and serve more of our monitors, we need to have adequate member reserves. You've used the term RBC a couple of times this morning. What does RBC refer to? Miss Ashley, I'm so sorry, could you speak up a little bit and I'm having a bit of a hard time hearing you. You've used the term RBC a couple of times in your testimony. What does that refer to? RBC is a ratio. It's a ratio that compares the amount of risk that Blue Cross has taken on in its insured business and compares it to the amount of reserves that we have to cover in the case of unforeseen events. We take the reserves and divide it by the risk and that's the ratio. Just to go back to the membership growth point, when Blue Cross takes on more membership or it's membership growth, how does that impact the RBC calculation? The mechanically, the way it works is additional members will require the denominator to grow and the denominator will. In order to keep the same ratio, you'd have to have the numerator grow as well. So by virtue of the growth in the membership, have to be sustained by additions to the member reserve. What is Blue Cross' current risk-based capital or RBC level? Our current risk-based capital at the end of 2022, December 31st, 2022, was 434. How does that compare to the RBC range required by the Department of Financial Regulation? That 434 is well below the bottom end of the range ordered by the Department of Financial Regulation, which is 590 to 745. Is the Department of Financial Regulation monitoring Blue Cross' RBC level? Yes, the Department of Financial Regulation monitors our RBC level and we provide periodic reports. In addition to the annual report, we periodically update DFR on the forward-looking projections for our risk-based capital insolvency. Ms. Green, have you read DFR's solvency letter in this proceeding? I have. Do you have any reaction to the DFR letter to share with the board today? Yes, the DFR letter for the individual market is included in Exhibit 16 and I think the small group is Exhibit 17. I do want to draw the board's attention to a couple of statements that DFR consistently makes that provide for the foundation of the insolvency. Two points really, one is any reduction in rates that aren't actuarially supported will undermine Blue Cross' solvency. The other point I wanted to draw out is that DFR has consistently made the point that insurer solvency is the most fundamental aspect of maintaining consumer protection. And embedded in that thought, they go on to say that the way an insurer stays solvent is that it has to consistently charge premiums that are fully funded. So the basis of solvency is really grounded in charging fully funded rates consistently. Ms. Green, are you prepared to provide additional testimony and answer questions regarding Blue Cross' RBC projections for 2023 and 2024? I am. Is it appropriate to provide that testimony in public session? It is not. Why not? Our forward-looking financial projections are confidential, commercially sensitive information that provides us competitive advantage. We make reasonable efforts to keep our forward-looking projections confidential. And this is important in a competitive market. And many of our assumptions in those forward-looking projections include confidential contracts and negotiations as well. So hearing officer Barbara understanding that an executive session is contemplated for later in the hearing, Blue Cross reserve additional direct questions on that topic until that period. We'll move on from that topic now. Ms. Green, have you read Lewis and Ellis' actuarial opinion? I have. Did you have any reaction to that opinion to share with the board? I had two things that I'd like to draw out that I'll be real brief because they've been touched on previously in today's testimony. The first was I appreciated the analysis and research that Eleni did to compare administrative costs to other health plans nationally. They concluded that we are atypically low, atypically low administrative cost plan given our small plan size. And they went on to say that it appears that we manage and limit our expenses better than the typical health plan. This is something that I've known for years. I've testified a number of years about how Blue Cross is continually focused on delivering service and quality products and our very robust provider network for the lowest cost possible. And we allocate our precious resources, whether that's our expert people resources or our technology and programs to where we feel there's most value. And this is something that we do actively and it really allows us to both be efficient and also participate in the health care system broadly in Vermont, our local focus. For instance, we participate meaningfully in health care reform efforts, even with the low administrative cost. The second item I wanted to just draw out was Eleni's support for the 3% CTR. They looked at that and based on the RBC level and a comparison that they did to other plans nationally, they found that our CTR of 3% was at the 52nd percentile, which is right in the middle of the pack and was reasonable. I'd also like to just point out that even last year when Eleni's report was issued and through my testimony, it was clear that there was a growing sense that the CTR would need to be increased and for two reasons. One is we've always said that if the RBC, this is our philosophy for determining the CTR to include in our rates, is that if the RBC falls below the bottom end of the range ordered by DFR and is not immediately expected to move back into that range, it would require an increase in the CTR. And the second important point is that we knew with the increase in hospital budgets and medical cost trend rising and rising quickly that the minimum necessary CTR to maintain reserves would have to go up. The 1.5% was really the appropriate only in the environment where the minimum necessary had medical trends in, say, the mid-single digits and we're now into the low and high teens. So the CTR required to minimally maintain reserves has to also go up and that's what's driven us to the 3% assumption. There were questions earlier in the hearing today about COVID cost and assumptions about COVID costs in the proposed rate. Was there anything you wanted to add on that subject? Yes, I thought I could potentially help with the understanding about how the COVID cost assumptions are impacting rates by just elaborating that the reason that Blue Cross had been estimating the COVID cost and tracking COVID costs is that we pulled them out of our premiums in 2021, 2, and 3 because we had, as everyone remembers, what sometimes is referred to as a claim goal in 2020. So it was important for us, you know, we said that's what reserves are for, the lull in 2020 would be offset by COVID claims as they come through in 2021, 2022, and 2023. And I just wanted to point out that the reason that we're not pulling that out anymore is that we've depleted reserves. In other words, we've spent more on COVID costs than we've benefited from the lull in 2020. So we're now including those costs in premiums. And so the calculation of how much that's affecting rates is really just a calculation of how much we would have taken out had we continued down that path. So I just wanted to share that context for the folks that are trying to figure out what a reasonable assumption about that would be. So the experience and the amounts are all in the rates for 2024. And the debate about what the assumption is is really just a debate about how much of the increase is due to that. As Martine testified earlier, the COVID costs are really just being trended alongside of all of the other similar costs in our claims experience. I don't know if that helped, but I just thought I'd offer that up. Irene, have you testified in your pre-filed testimony that Blue Cross has requested rates that is by the applicable regulatory criteria? I have. I've heard a number of questions today directed at the topic of affordability. Would you please explain why Blue Cross's rates satisfy the affordability criteria? Yes, I can. And I'll again be hopefully quite brief because the planes I had planned to cover have been covered already in some way this morning. First, as the board has recognized, affordability is but one criteria among several criteria that have to be carefully balanced. And the non-actuarial criteria of affordability, quality, and access, there's some tension between those criteria as the board has recognized in the past. So anytime there's an attempt to reduce a premium rate purely to make the premium cheaper in the name of affordability, while in doing so, it doesn't cover the cost of health care and paying claims. What that ultimately does is undermine and will imperil Vermont's access to care because it undermines the solvency of the insurance company. And that's what the AFR meant when they said that protecting solvency is the ultimate form of consumer protection. So affordability ultimately has to acknowledge that the premiums have to cover the cost of insurance and the cost of paying claims. So there's a difference between determining whether a premium rate is adequate as compared to looking at the affordability of the program. The second point I thought I'd make is the board's asking what does Blue Cross think about when it thinks about affordability. The premium rate being fully funded to maintain reserves is kind of the table set. It has to be that way, otherwise it undermines the solvency. And we have supported through the documentation and the testimony so far that there isn't any padding in the rates. So really the need to cover the rates for the minimum of the medical and pharmacy cost plus the cost of insurance is, you know, that in our view is a given. However, as I think Martine and Chair Foster talked about, that affordability has to take into account what it is that you're paying for. And in Vermont, when we have strong access to care and high quality coverages that are required in this regulatory framework, the affordability is, you know, is the other piece that has to give and reflect that we have very high quality coverage here in Vermont. So the health insurance premiums are very, very high, but they cover healthcare services that are also expensive and increasingly more expensive. And then lastly, I just wanted to point out or share that there was a conversation about the subsidies and would things be affordable without the subsidies. It's important for us all to remember that the ACA regulatory framework is really designed, the whole program was designed to bring more coverage to more Americans and more Vermonters and to ensure that we don't have increasing uninsured rates. So from the individual consumer's perspective, we really do have to incorporate and we do think about the subsidies as part of the overall framework. And if we were designing a system that everyone had to pay direct, we collectively, not Blue Cross, but the program of the ACA in Vermont might have to make different choices about access and quality coverage if that were the case. So I just thought I'd share some thoughts about how we see the affordability from the perspective of adequate premium rates. I think that you also heard questions from board members, Mr. Foster, about how Blue Cross considers its members financial circumstances and access to care. Are you able to further? Sorry, sorry, Bridget. We're going to have to get a restate the question. I think you were muffled there for a little bit. Sure. Sorry. You heard earlier in the hearing questions from board members at Chair Foster about how Blue Cross considers its members financial circumstances and access to care. Are you able to further address how Blue Cross considers those factors as part of its mission? Yes. Thanks. I would like to address some of those questions. You know, Martine Lemieux is our lead actuary and is responsible for calculating what we think the premiums need to be in 2024 to cover the cost of insurance and claims. And so that is a very specific exercise to determine what we think the fully funded premiums would look like in 2024. But when asked about how does Blue Cross think about affordability as we're doing that, we really are sort of deeply invested in our mission as a fully functioning member of the health care system here in Vermont. And a lot of what we are doing are looking for opportunities to help our members sign up for the policies that they can afford and get the subsidies that they should be making sure that they're looking for that they get. We have as a nonprofit health insurer, we're always working to make sure that the members get the care that they need for the coverage that they're paying for. Our services is very much focused on, we call it taking the member out of the middle when they're just trying to navigate, you know, getting the services that they need. We also have, you know, on a day to day basis, we're totally familiar and aware, keenly aware of how hard it is for some of our customers to make ends meet. In the COVID response, we were very flexible about how payments could be made. And on a day to day basis, even today, even before the flood circumstances of last week, we are very member focused and we'll talk through with people if they're finding it difficult to make a payment and need some more time or maybe a payment program. So I think when asked about how are we thinking about affordability as we develop the rates, we're always thinking about the health care costs in the Vermont system. And when we develop the rates, we are clearly focused on making sure that they are adequately funded so that the solvency can provide that ultimate consumer protection that is a key part of our role. Thank you. That concludes Ms. Green's direct testimony for the public session. Thank you. And I think this is a good time to take a lunch break, come back and do cross and you redirect and then move on to Jesse Lucier would be the next witness. So unless there are any objections, I propose we come back at 1235 for that. That sounds good to me. Great. So we'll adjourn until 1235. Thank you. Thank you. All through record.