 Blue Cross Blue Shield of Vermont. At the end of the day there will be a brief opportunity for public comment but most importantly we want everyone to know that there is a time period blocked off for public comment for tomorrow starting at 4 30 on both the Blue Cross and the MVP filings. For the purposes of today's hearing I'm going to designate Michael Barber, the general counsel for the board as the hearing officer and with that Mike I'm going to hand over the meeting to you. Okay thank you Mr. Chair. Good morning everyone. Again my name is Michael Barber. I've been appointed by the chair to serve as the hearing officer for today's hearing. As the chair said the purpose of this hearing is to take evidence and argument on Blue Cross and Blue Shield of Vermont's 2021 individual and small group rape filing. The docket for this case is GMCB-005-20RR. The Green Mountain Care Board has jurisdiction over this matter pursuant to Title 18 of the Vermont statutes annotated. Section 9375B6 as well as Title 8 of the Vermont statutes section 4062 subsection A. Representing Blue Cross and Blue Shield of Vermont today are Bridget A.C. and Mike Donafrio of the law firm Stress and Mayor LLP. Representing the health care office of the health care advocate excuse me are Jay Angoff, Kylie Kuiper and Eric Schulteis. I also want to recognize the board's general counsel associate general counsel excuse me Amron Aberjaley who will be conducting the direct examination of the board's actuaries as well as Gavin Boyle as I'm not sure he's on but the general counsel for Department of Finance or Regulation. Hi Am I. Great. Hi Gavin. Because we're holding the hearing remotely before I go any further I just wanted to check and make sure all the attorneys and all the board members can hear okay and can be heard. So I'm going to call on each of you if you could just take yourself off mute and let me know if you can hear okay. That'd be great. Mr. Chair. Here. Board member Holmes. Yes. Board member Lunge. Yes. Board member Yousefer. Yes. Board member Pelham. Yes. Amron. Yes. Ms. A.C. Yes. Good morning. Good morning. Mr. Donafrio. Yes thank you. I can hear and I can see you all. Thanks. Ms. Kuiper. Kylie if you're speaking you're on mute. She was sort of in some issues with the call in. Okay. Can you hear me now? Yeah we can hear you now. Okay. Sorry about that. Thank you. Hey Eric I can hear you and Sonny can you hear okay. Yes good morning. Can you hear me okay. Again thanks. Okay I'm going to keep myself muted but if I have any trouble hearing I will unmute and give a wave and let you know but thank you. Okay thanks. As we discussed if at any point you get dropped from the call today you have my cell phone number please just text me and we'll take a pause while you get back on. We are recording today's proceedings. We also have a court reporter here to transcribe the proceedings and we will provide the parties with a copy of the transcript as soon as we receive it. It looks like we have 53 people in attendance this morning. If we were holding the hearing in person we would have a sign-in sheet outside the room. Obviously we can't do that here. You know since this is a whole day long hearing people are going to be coming and going so I'm kind of thinking of skipping the kind of roll call of phone numbers that the board typically does in regular board meetings but does any party have a objection to that? No objection. HCA. No objection. No I don't. Okay thanks. For members of the public who are present as the chair said we will be taking public comment at the close of the proceedings however I can't say when we will be able to get to that portion of the meeting so if you don't want to sit through what's sure to be several hours of testimony we're going to have a meeting tomorrow afternoon from 4 30 to 6 30 in the afternoon that will be dedicated exclusively to hearing from the public on this filing and the other individual in small group filing from MVP. Information about that meeting and how to participate can be found by going to the Green Mountain Care Board's website and clicking on the rate review tab. Additionally you can submit written comments to the board via our website and by regular mail and the board will be taking comments through July 23rd on this filing. For members of the public who are present I'd ask that you check your microphones at this point and make sure you are muted. Also for those of you participating or watching on the computer please do not use the chat function of Microsoft Teams that would be very distracting for all the participants and if you want to comment please use one of the avenues that I mentioned previously. Before we begin I want to remind the board and the parties to exercise caution regarding information that has been marked confidential as these matters can't be discussed in a public setting. The parties have marked documents that contain confidential materials as confidential in the hearing binders and if it's all right with you Ms. Acier, Mr. Donofrio if you could just describe how the confidential materials are designated in the binders because it differs between the carriers and the hearings so I think it would just be helpful to explain how that was done. Sure so we've only provided in the binders the full unredacted copies of exhibits each exhibit that has some confidential information in it is marked as confidential I believe both on the document and in the table of contents and then the material within the document that was redacted for confidentiality purposes is highlighted in the document. Okay thank you. So if it becomes necessary to discuss confidential materials in the binders we will need to go into an executive session. We have a separate phone line for that purpose should we need it. So Mr. Donofrio or sorry Ms. Acier and Mr. Angoff the board received exhibit binders on July 15th with 21 bait stamped exhibits. After receiving the binders we received a response to board questions regarding pension losses which was marked exhibit 22 as well as a chart marked exhibit 23 and then an exhibit from the HCA marked exhibit 24. I just want to check and make sure everyone who needs those everyone who has a binder has those documents. Does anyone not have those documents? Okay hearing nothing I'll move on. So I understand that the parties have stipulated to the admission of all of those documents. Is that correct? Yes sir. This is John Angoff. Okay. I see you nodding your head Bridget. Yes that's right. Okay. I also understand that the parties have stipulated to the admissibility of the HCA exhibits which are not included in the briefs. Is that correct? Yes it is. Yes that's correct. Then at this point I'm going to admit all of these documents into evidence with the exception of exhibit 23 the graph. I understand it. It's a chart showing calculations from data published by the Kaiser Family Foundation and the HCA has stipulated to its admissibility but I feel like I need a factual foundation for that before I admit it. So I understand that can be provided through Mr. Schultz. Yes that's correct. Mr. Barber that'll take place during Mr. Schultz's direct testimony. Thanks. Okay. Then I'll entertain a motion to admit this document after most Mr. Schultz has established a factual foundation for it. Okay thank you. In years past we have sworn in the witnesses all at once at the beginning of the hearing because we're doing this remotely and I can't see everyone. I figure we just do that as the witnesses are called. So at this point does either party have anything to discuss before we move to opening statements? Not for the HCA. I have nothing for the board unless Mr. Donafrio has something nothing for Blue Cross unless Mr. Donafrio has something. No nothing further. Okay. And Ms. Stacey would you like to make an opening statement? Yes thank you Mr. Barber. Good morning chair Mullen and members of the board. In some ways this day will be pretty similar to last year's rate hearing in July of 2019. The board members the lawyers and many of the witnesses will be the same and likewise the core of Blue Cross's presentation the actuarial analysis that supports the proposed rates will be similar. But the fact that we are in this virtual meeting not at the state house is only the most obvious sign that the world is a very different place than it was a year ago. The pandemic has affected all of our lives the health care system and the economy. It's tempting to say that sitting in the hearing room last year no one could have imagined this. But I went back and looked and in fact at least three times during the hearing last year witnesses pointed out the risk of an outbreak and epidemic or a pandemic. Both Blue Cross and Commissioner Pichak testified that Blue Cross Blue Shield of Vermont's solvency is critical to its ability to pay claims regardless of unexpected events including an epidemic. Solvency and financial sustainability are long term propositions for an insurer by definition that means planning for the unexpected. For Blue Cross Blue Shield of Vermont that means maintaining adequate reserves and requesting rates that are sufficient to cover the cost of providing health care to our members. Today through testimony from Dr. Kate McIntosh Paul Schultz Ruth Green and Andrew Garland the board will hear three main themes. First and most critically that the rate is actuarially supported. Blue Cross Blue Shield of Vermont has chosen not to dispute L&E's utilization trend. That means there is no dispute on this point. A rate increase of 5.5% is necessary given what it costs to provide health care to our members. The board's actuary agrees that the assumptions for administrative costs and contribution to reserves are reasonable and its analysis shows that these requests are modest when compared to other similar plans. Health care costs are continuing to rise. Mr. Schultz will discuss some of the primary drivers of these increases in his testimony and Dr. McIntosh will provide clinical context for one of those drivers specialty pharmaceuticals. The board has asked questions prior to this hearing about Blue Cross' recent pension loss. For today I think the key point is that not one penny in these rates is based on the pension loss. What else is not in these rates? There's no accounting for any increased costs in 2021 due to the pandemic even though we fully expect that there will be increased costs for things like deferred care, treatment, and a vaccine. The requested increase from Blue Cross Blue Shield of Vermont is lower than that of its competitor. The second theme that the board will hear is that both before and during the pandemic, Blue Cross Blue Shield of Vermont has remained a leader and a partner in Vermont's health care reform efforts and the health care system. Dr. McIntosh will discuss our rapid response to the pandemic and the steps taken to support providers, protect public health, and keep members covered. She'll also discuss examples of value based programs that are helping to improve the quality of care. Mr. Garland will discuss how Blue Cross Blue Shield of Vermont worked with the Accountable Care Organization to adapt the pandemic. Ms. Green will explain why adequate reserves have been crucial to these efforts. Blue Cross has been able to target resources where they are needed most, helping people stay covered, assisting providers, and adapting policies to meet immediate needs. The third theme that the board will hear is that as we face another year of substantial uncertainty, including real uncertainty about future impacts of the pandemic in Vermont, protecting Blue Cross Blue Shield of Vermont's solvency is more critical than ever. I want to repeat something that Commissioner Pichak said in his testimony last year. An independent and financially sustainable Blue Cross Blue Shield of Vermont is good for consumers because it certainly can pay its medical claims regardless of the economic conditions that it might confront in upcoming years. It can pay the medical claims regardless of unexpected events that might occur due to illness, outbreak, other extreme conditions. And a financially sustainable Blue Cross Blue Shield will also have the capital it needs to invest in programs and people and in technologies that will improve the consumer experience and more importantly, improve consumer outcomes as well. Every word of what the commissioner said last year remains accurate and even more important today. This pandemic is far from over and we don't know how it will play out in Vermont. The actuarial team at Blue Cross Blue Shield of Vermont has worked tirelessly to try and model potential impacts of the pandemic. That modeling, which we've shared with the board, shows a range of potential results. As Mr. Schultz will discuss in more detail for claims costs based on the best information we have, the pandemic is likely to have an impact on claims costs that ranges from modestly favorable to substantially unfavorable. Overall, with respect to claims costs, the majority of outcomes are relatively neutral. But in terms of planning for uncertainty, the likelihood of what some call a windfall for Blue Cross Blue Shield of Vermont is vanishingly small. In contrast, it is not hard to construct an outcome in which Blue Cross Blue Shield of Vermont has to pay substantially higher claims. The proposed rates don't include additional claims costs related to the pandemic. We have consistent that part of the function of reserves is to absorb those kinds of unexpected costs. It's important to understand, as Mr. Schultz will explain further, that funding these pandemic-related costs through reserves is no different from providing a rate discount or a rebate. But it's critical, however, that the proposed rates be fully funded so that Blue Cross Blue Shield of Vermont has adequate reserves to meet these needs. Thank you. Okay. Thank you, Ms. Stacy. Mr. Angoff, do you have an opening statement? Mr. Angoff, do you have an opening statement? Yes, I do. Thank you, Mr. Hearing Officer and Mr. Chair and members of the board. First thing I'd like to do is to express my admiration for the board and the government of Vermont and the people of Vermont for what a great job they have done in containing the coronavirus. This is an underreported story nationally. Vermont obviously has a lot of natural advantages when it comes to containing the coronavirus. It's got a small population. It's got a sparse population. But so it makes no sense to compare Vermont to New York or Boston or Albany. But even compared to other small, sparsely populated states, Maine, New Hampshire, Vermont has done by far the best job, by far the best job in containing the coronavirus. That comes at a cost. Obviously, there's been tremendous sacrifice by Vermonters. There's terrible unemployment. The economy has been devastated. But it has saved lives. There are a few companies, though, that have benefited because of the sacrifice and the suffering of Vermonters. And one is Blue Cross. Blue Cross did not cause the coronavirus pandemic, but Blue Cross is benefiting enormously by the coronavirus pandemic. It's benefiting in two ways. First, it's benefiting because there has been so little coronavirus in Vermont because the costs to Blue Cross of the coronavirus have been so nominal. And second, it's also benefiting because people at great sacrifice have avoided going to the doctor, avoiding going to the hospital. So Blue Cross's traditional costs just aren't there. So bizarrely, perversely, although Vermonters have suffered, Blue Cross has benefited enormously. That's the first thing I'd like the board to keep in mind as you hear Blue Cross once again ask for more money. The second thing that I'd ask the board to keep in mind is Blue Cross is also the recipient of enormous windfalls over the past couple of years. You remember last year, there was a little bit of discussion about, well, were they really going to get all this money that the Trump tax law authorized in 2019 or 2020? And they said, well, no, we may not get it in 2019. We may not get it in 2020. Well, they've not only have they gotten what was doing in 2019 and 2020, but a new law was passed to accelerate the refundable tax credits under the Trump tax bill. So that Blue Cross in 2020 is guaranteed to get almost $40 million because of the Trump's tax act. In addition, Blue Cross has more money coming to it, about $15 million based on the Supreme Court's recent decision in the risk card and litigation and the court of claims decision in the cost sharing litigation. So that's additional money that Blue Cross has coming to it. There's no uncertainty about that. So that's the second thing I'd like the board to keep in mind as you hear Blue Cross ask for more money once again is that they've gotten an enormous amount of money over the past couple of years from other sources. The third thing, though, that I'd like to keep the board to keep in mind is the most important. And that is the $40 million that Blue Cross threw away the $40 million that their policy holders had paid and that this board has authorized in the past. Blue Cross took $40 million and burned it up. It went down the drain. That isn't worth 180 points of RBC ratio. What that means is obviously, but today, Blue Cross has so much money, it's not a problem. Blue Cross does not deserve an increase. Without this $180 million drop, they would deserve a decrease. With the $180 million drop, it's probably close to break even. But how can a company, you'll hear Paul Schultz talk about how Blue Cross is the steward of our policy holders' premiums and our reserves. You just heard Ms. Esay talk about the importance of maintaining adequate reserves. Well, what Blue Cross, the stewards of their policy holder reserves did is make a foolish reckless investment, invest money not in bonds, not in stocks, but in some very high-flying hedge fund, volatility hedge fund vehicle, which resulted in a $40 million loss in one month. So that's the third, and it's heartbreaking. It's heartbreaking, Mr. Chairman, because but for this loss, policy holders of Vermont would be getting a decrease this year. So that's the third thing I'd like you to keep in mind, Mr. Chair, and just I'd like to close by saying once again how I admire the board and the government of Vermont and the people of Vermont for how much they've sacrificed in order to contain the coronavirus. Thank you very much. Okay, thank you, Mr. Angolf. Ms. Esay, Mr. Nafio, please call your first witness. Blue Cross calls Dr. Kate McIntosh. Can you hear me okay? Yes, I can. Are you able to, I can't see your video for some reason. You may have to pin it to your desktop. Yeah, just one second while I do that. Now I can see you. Hi. Kevin, you're on mute. Kevin, did you have something to say? All I was saying, Mike, was that you were probably going to have to allow a few seconds for each witness so that we can pin them. We're going to have to unpin them when they're finished probably to make room for the additional faces that we pin. So, and I was letting you know that it did indeed work once you pin, once we pinned her, so. It's a good time to ask all the board members. Can you see Ms. McIntosh? Anyone can't see Ms. McIntosh? Hearing none, Ms. McIntosh, are you prepared to take the oath? Yes. Do you swear or affirm that the testimony you're about to give will be the truth, the whole truth and nothing but the truth? I do. Ms. AC, the witness is yours. Good morning, Dr. McIntosh. Would you please state your full name for the record? My name is Kate McIntosh. What is your position with Blue Cross Blue Shield of Vermont? I am the Senior Medical Director and the Director of Quality for Blue Cross Blue Shield of Vermont. Would you please take a look at exhibit 13 in your binder? Yes. Is exhibit 13 your prefiled testimony in this matter? Yes, it is. Do you affirm that it is true and correct to the best of your knowledge? I do. Dr. McIntosh, would you please briefly describe your clinical and practice background for the board? So, I am a board certified pediatrician. I had 22 years of clinical practice experience before I came to Blue Cross. I ran a private practice in Middlebury for 16 of those years and I was the Chair of Pediatrics at Porter Hospital. Dr. McIntosh, you provided some statistics regarding the COVID-19 pandemic in your prefiled testimony. I'm going to ask you to update some of those numbers. You indicated that in June the number of new infections per day in Vermont average between seven and eight. What has been the experience so far in July? For the first two weeks of July, the average number of new infections per day remained between seven and eight and the range reported by the Vermont Department of Health was between two and seventeen and these numbers do not reflect any of the goings on down in Manchester which are still under debate. So, the average range was between two and seventeen per day. In your prefiled testimony, you also gave some information regarding the spread of COVID-19 nationwide. What, if anything, has changed since your prefiled testimony was submitted? So, since my prefiled testimony was submitted, we've continued to see significant surges of COVID-19 in the states in the West and the South. The number of states seeing a rise in new infections, however, is beginning to spread throughout the country and is not limited just to the states that are seeing surges. The rate of new infections per day is currently hitting approximately between 60 and 70,000 new cases per day within the country but we have seen some surges as high as 77% as well. I don't expect these numbers to change at this point unless they are going to increase and the general consensus of Dr. Fauci and some of the other physicians up at the level of the NIH is that we are still within the first wave of this virus, that this is not the second wave, this is a continuation of the first wave and we haven't even begun to see the end of this thing. You described in your prefiled testimony your opinion that the course of the pandemic in Vermont is unpredictable. Would you please briefly summarize your opinion on that issue? Vermont is not an island. Unlike New Zealand or Australia, we cannot close our borders and allow Vermont to simply coexist by itself. What's happening in the rest of the country is going to affect us and circumstances can change very quickly if there's an outbreak. The virus spreads particularly easily and one of the things that is the most concerning about this virus is that it spreads often by asymptomatic spread and there is new evidence coming out just within this last week to suggest that asymptomatic carriers may be some of the primary spreaders in super spreader events. The other problem is that nothing has fundamentally changed about this virus since March. We still do not have particularly effective treatments. We have no way of preventing it except through public health measures and it even though I think that we as a country are beginning to lose interest in the virus, the virus is still present and is still a real and present concern. So fall and winter are a real concern because although the virus spreads less outdoors, it does spread more easily indoors and in confined spaces. So as the cold weather returns, the virus will spread more easily. As schools and colleges reopen, there is a concern that we will see more spread because you have larger numbers of people in close and confined spaces. Dr. McIntosh, what has been your role in Blue Cross Blue Shield of Vermont's response to the pandemic? I've played a lead role in the pandemic response including the responses toward providers, toward patients, toward stakeholders, and then internal policy work as well. In your pre-filed testimony, you provide details about that response. Would you please briefly summarize for the board what Blue Cross Blue Shield of Vermont has been doing during this unprecedented time? So Vermont has been a real success story so far. We worked very fast as a state and also as a company. I think that the governor deserves kudos for the rapidity with which he shut down the businesses initially in March. And I also think that because of our demographics, we were fortunate and we were way ahead of the rest of the country. I started watching this pandemic in January when it first started as it and then through February as it marched its way across the world. And we became concerned pretty early on that this was going to have a major impact on our own company as well as on our members. And our goal was to keep our members safe and to keep our company functioning. So I don't want to repeat all of the details of what we did to connect with stakeholders and regulators and to keep everything moving. But I want to explain how we targeted our resources to areas that were of particular concern. So the first concern was we wanted to make sure that providers could still care for their patients. I ran a practice. I know firsthand what the impact of this is to these practices. And so my first question when all of this started was how do we help to keep these practices open? I knew what the challenges were going to be. And so one of the things that we did was I recommended to DFR that they join us in promoting telephone care as a part of as an extension of audiovisual telemedicine during this emergency so that patients could get the care that they needed and so that providers would be able to keep their doors open especially these small independent practices who were clearly going to struggle as a result of the of the pandemic and don't have as deep a financial bench to be able to support themselves. We took many steps in this area to support virtual appointments making it easier for people to get prescriptions filled to change policies virtually overnight so that we could remove barriers to care. Our second thing was that we wanted to make sure we could keep people safe. So we worked with DFR to ensure that people with symptoms could get evaluated without any concern for co-payments or for cost share associated with their emergency room visits or their office visits or their urgent care visits. And we wanted to also approve we approved all transportation of COVID positive patients because we wanted to keep family members safe. We wanted patients discharged from the hospital to be able to come home and not expose their family members on the trip home if they needed to continue to be isolated. We also wanted to support the system as we prepared for what was and is still very unknown. So we suspended prior authorization requirements for hospitals so that they could move patients around within between nursing homes and hospitals and between different types of facilities to prepare for any kind of a surge that might come. And we also wanted to keep people covered. It's incredibly important and we recognize that Vermonters were having difficulty with payments so we offered flexibility and we have not to date canceled a single QHP member from nonpayment. Thank you. Dr. McIntosh are you generally familiar with the proposed rate that Blue Cross Blue Shield of Vermont is requesting in this proceeding? Yes. And understanding that Mr. Schultz will address the actuarial basis for the rate in detail. To your knowledge are increasing drug costs part of the reason for the rate increase? Yes. I know that there are certain categories of specialty drugs that are definitely cost drivers. Are you able to provide some concrete examples to illustrate this point for the board? Yes. There are many but I'll take one in particular. So melanoma treatment is an excellent example. Melanoma used to be a death sentence and in fact when I was a resident I had a colleague who died very young from melanoma so I know this personally. The amazing new treatments for melanoma have made melanoma essentially a chronic condition. This is a miracle drug and there are many of these out there for all kinds of other treatments. They extend life, they preserve life but they are extremely expensive and because of their nature as a biological agent they don't come out as generic so they are they are they remain expensive. There are many new oral chemotherapy treatments for example on the market that have become available for cancers that never previously had treatments and this is very exciting but it is also a real driver of our of our overall cost. The other thing that has come over the horizon are the new treatments for gene therapies which are some of the most expensive drugs out there actually they are the most expensive drugs out there. The first gene therapy has come on to the market. It is a treatment for a condition called spinal muscular atrophy. It costs 2.1 billion dollars for a dose of this medication. There are approximately 600 additional gene therapies in the pipeline almost all of which are likely to be priced somewhere between a half a million dollars and two million dollars per dose. So these are life-saving treatments which is good news but the cost of these drugs raise very complex policy issues and as you know these are often discussed in other forums but for our purposes the costs are real they're steadily increasing and we do have to account for them in the rates. And Dr. McIntosh are you familiar with programs that Blue Cross Blue Shield of Vermont is implementing to reduce the cost of health care while maintaining the quality of care? Yes that's part of my work as the director of quality. So as the director of quality my focus is on value and value is the intersection of cost and quality so a high cost product may produce a high quality result and the value may be appropriate or a high cost product may not produce a high quality result and we would consider that to be low value care. So one of the challenges and the things that we are really working to do is to remove low value care from the market and by doing this we're trying to align the cost of a service and the quality of it so that we can get a sense of where those areas of high value care are and where those areas of low value care are. Is there an example of a value based product change that you could describe in more detail for the board? Yes so our new laboratory benefit manager called Avalon is a good example of this approach. Avalon takes an approach to laboratories that addresses that looks for what are high value tests that are being done and what are low value tests that are being done and they use their medical policies which are beautifully written by the way to distribute care as what is high value for a chronic condition and what is low value for a chronic condition. So for example it is important for all adults to have a cholesterol level checked at least once possibly once a year but it isn't necessary to have a cholesterol level checked six times a year and the wonderful thing about Avalon is they promote this high quality care with no impact on the providers. So the providers are not forced to go through prior authorization or any process like this but at the same time Avalon is promoting this much more revolutionary approach to high value care. In the past our lab reimbursement was pegged to Medicare and it was a good system but bringing in a partner with this expertise in lab value is an even better approach and we're trying to move beyond where the industry is right now in fee for service into this high value model and we've already seen better outcomes with Avalon and those savings are reflected in the proposed rates. With respect to the proposed rates another element of the rates is administrative costs and again understanding that you're not an actuary is it your understanding that programs to improve quality may have administrative costs to implement. Yes they do. The tradition from fee for service to value requires both initiatives and those and the cost of implementing those initiatives. As we struggle to balance our need to keep costs low while simultaneously developing these new programs and these initiatives to improve the value of health care overall there is a cost to trying to move to value. Is there an example of a program you could describe to the board where in your view the cost of the program is justified by the outcome. Yes a good example of this program is our provider passport program for radiology. So we designed this program to reduce the burden on the providers while simultaneously prompting best practices. So what we did was there are certain types of specialists who order a lot of tests and if they order a lot of high cost radiology tests they can qualify for this program. Overall if their referral rate of these tests is within best practices with a variance of only 2 percent so in other words if 98 percent of the tests that they order are within best practices for these high volume these high high cost tests then we have removed their need for prior authorization. Now we know that we will see perhaps a slight increase because those two percent of their tests that are not within best practices are still going to go through but we feel as though the value there is greater than the value is greater than the risk of that increased cost because we're getting high quality and lower burden on the providers. We also have a second track where if you have about a 95 percent track record of best practices then we waive PA but we do education to try to explain to the individual provider why it is that the five percent of tests that they're ordering again are not necessarily best practice and we're hoping that with that we will see them move into the 98 percent range. So what we're doing is we are accruing a little bit of extra cost from the tests that might not be necessary but we are substantially decreasing provider burden for these providers who are demonstrating that they can come into line with best practices and providers can move in and out of this program depending on what their track record is but the monitoring the education the continuing education and the development of these programs all come into the administrative cost but we feel that the that the value of this program to decreasing burden and promoting the quality of care overall quality of care is worth it. Thank you to shift gears briefly back to the pandemic um Dr. McIntosh did you work with Mr. Schultz and the act actuarial team on modeling potential financial impacts related to COVID-19 on Blue Cross Blue Shield of Vermont. Yes I did. Would you believe would you please briefly describe the role you played in that process? Yes well I reviewed 33 categories of care and we assessed whether those specific types of care and the developed and whether we thought that they were likely to be deferred care or care that had simply disappeared out of the system so with each of these categories we developed assumptions for the return of care for that service category so overall we estimated that 56.1% of services that were deferred during the slowdown would be made up and I also assisted in then also developing assumptions about changes in demand for certain claim areas that were likely to see differently in the future as a result of the pandemic. Have you read the Oliver Wyman report that was submitted by the Department of Financial Regulation? Yes I have. So I want to direct you to exhibit 10 and specifically page seven of exhibit 10. Yes. Is that the Oliver Wyman report? Yes. Is there any part of that report that you would like to respond to? Yes so Oliver Wyman suggested that our model was conservative meaning that our estimates for the return of deferred care were too high. I think that they particularly suggested that in that our estimations of 100% in some categories were too high and I have a couple of responses to that so first we quickly realized when we started to do the math that minor changes like 100% 95% or even 90% had really very little impact on the model so with some categories of care it's very likely that the return is going to be 100% and in our model it's also in some areas of care that we calculate the return as being zero. Now maybe some of those zeros are going to turn out to be twos or threes or five percent and maybe some of the 100s are going to be 95% or 92% but that level of difference doesn't change the outcome enough to matter. So second of all I think that Oliver Wyman may have been thinking about a shorter time frame than we were so we were asking the question how many of these claims are going to return over the next two to three years. So for example if your knee is scheduled to be replaced if you're scheduled for an in replacement and then the pandemic intervened sure you might postpone that surgery for a few months but the fundamental reality is your knee still hurts every time you walk and at some point that her pain is going to become frustrating enough that you are going to go in and you're going to have that surgery done so that is part of our anticipation that we are going to see this catch up because many of the things that we saw deferral on are the kinds of things like chemotherapy for example that are not simply going to go away. If you deferred your chemotherapy you're still going to get your complete course of chemotherapy. If you deferred your knee replacement you still need a new knee. And third what we're seeing in June is the care did come back and frankly I was actually surprised at how high the care returned to things like the emergency room. I thought that we were going to see a prolonged session of inhibition where people were going to be afraid to go to the emergency room but in fact the ER has come back above benchmark and office visits are coming back strongly as well. We've also seen a surge in mental health claims as a result probably of the pandemic and of the stress that people are under. And then finally we know that Vermont hospitals and providers are strongly encouraging people to come back and they're adding hours on the weekends and even and after you know traditional office hours to accommodate that higher demand for those deferred procedures. If Vermont experiences an increase in COVID infections above current levels would you expect a similar slowdown in claims as we saw in the spring of 2020? Generally no. Hospitals across the country are working very hard to figure out how to care for COVID and non-COVID patients at the same time. And hospitals are highly motivated to get their service lines up and running again despite a kind of baseline level of COVID that's going on in the background. So I think it's going to take a lot more than the sort of lower the levels that we saw in March and April to prompt the kind of shutdown that happened in March. Think we're much more likely to see an ongoing combination of regular ongoing care and then sort of bursts of COVID that are getting treated also separately in the same institution that's figured out how to split their care. Thank you. I think that's all I have for now if I could just have a minute to go over my notes. Of course. Thank you. I have no further questions at this time. Okay. Thank you. Mr. Enguff, do you have questions for Dr. McIntosh? Yes, I do. Good morning, Dr. McIntosh. You said that nationally there are six between 60 and 70,000 cases being reported today of the coronavirus. Is that right? That's new cases per day. Yes. But in in Vermont though, it's between 19 down to, what did you say, the range was between 19 and four or 19 and two? Two to 17. Two to 17. Okay. So what do you attribute the enormous difference between what's happening nationally and what's happening in Vermont? What do you attribute that to? So I think there are a variety of reasons that we're seeing that difference between Vermont and the rest of the country. The first is that I think we can give credit to the to the governor that we shut down early and hard. And if you listened to his report, his his presentation on Friday, he also refers to that the opening up back up of Vermont has been conservative and that we're falling, we're less conservative than the European countries, but more conservative than a lot of the country. And so we're staying in this conservative place. And that's part of why we've managed to not see a stark increase in cases. But I also think that it's important to remember that we have also been lucky. And we cannot underestimate that. One of the things that I would point you to is in my pre file testimony, I refer to South Korea, South Korea looked a lot like we look now, they they had the pandemic under control, and then they had an unexpected super spreader event that launched them into an out of control way. So it doesn't take much. It only takes one individual who may not even know they have symptoms in a large gathering to have a super spreader event to change these numbers. I don't want that to happen. I would like to stay where we're at right now, but we cannot take it for granted. And so you said the governor deserves credit, I'm sure he does. What about the people of Vermont? Have the people of Vermont done anything differently than people in other states? Not really. I think that there was, I think that we have, I think that the biggest thing that we did was we shut down before the cases came to us. If you look at our levels of personal distancing, for example, or our levels of our loss of mobility relative to other states, which there are lots of graphs and websites that do mathematical modeling of this, our decrease in our interpersonal spread has not been particularly different from other states. We dropped down to about 50% from our normal movement around. When we shut down, we dropped to about 50%. We didn't drop to 20%. We were pretty much in line with Massachusetts or with New Hampshire, Maine, and Connecticut. And we've been coming up just about the same way. I would say that mask wearing, we are not consistent across the state. So there are other states where mask wearing is much more prevalent and other states where mask wearing is less prevalent. So I think we fall kind of into the middle of the pack. I think we benefit from our rural nature and from the fact that we closed schools very early, but we cannot take it for granted. We are all the same protoplasm in this state as everyone is in every other state. And COVID will spread in Vermont the same way it will spread in Oklahoma or Tennessee given the opportunity. Sure. But Burlington is not Oklahoma City. Burlington is not national, let alone Burlington being New York or Boston. I mean, how much do you attribute Vermont's success in containing the coronavirus to the fact that there are no disrespect meant to any people who live in Burlington or Rutland, but there are no big cities in Vermont. How much does that contribute to Vermont's success in containing the coronavirus? I think there's a question that lower population density is a positive, but with lower population density also comes smaller academic medical centers and less medical reserve. So again, what the per capita rates are probably worth looking at as opposed to the absolute numbers for that reason. Sure. However, whether you look at per capita or absolute numbers, isn't it the case that Vermont is the best in the country? At this moment, Vermont is the best in the country, but past success is no guarantee of future success. Well, certainly. But you'd rather have some past success than past failure, wouldn't it? I think we know what to do. The question is whether we will get unlucky and have a super spreader event or whether we will relax too quickly the way the South did accidentally and see another surge. So you work with Paul Schultz on doing the projections of how much the coronavirus would cost Blue Cross over the next year, right? I ran the projections for the return of care. I did not run the actual numbers. Okay. So you just said that today there are between 17 and two cases, the ranges between two and 17 cases per day in Vermont, right? That was for the first two weeks of July. That's not for this moment right now. Okay. So between two and 17 for the first two weeks of July, what did you project would be the number of cases that Vermont would have over the rest of the year? How many per day? We did not. The pandemic was not part of our calculations. Those numbers are included in the scenarios that Paul Schultz ran, and he can tell you about those. Okay. Maybe I should ask him, but let me just make sure I understand. You're saying, obviously, Blue Cross came out with a projection. It projected, in fact, that it would pay out $339 million in 2021, in 2020. Sorry. In order to do that, you have to assume, don't you, make an assumption as to the number of coronavirus cases that would occur each day, don't you? I'm afraid I am the wrong person to have the conversation with because my role was limited to solely projecting what percent of deferred care was going to return that we projected was going to return over the next two to three years. I was not part of the calculation of those numbers, so I would ask you to talk to Mr. Schultz about that. I will. Thank you. In your pre-file testimony, you also say that as of June 30th, I found this hard to believe, no matter how successful Vermont is, that the number of Vermonters currently hospitalized for COVID-19 is one. That's not a misprint, right? That was true then at June 30th, correct? That was correct as of June 30th, and as of yesterday, the number hospitalized was four. Say that again. As of yesterday, the number hospitalized was four, so the number will change. Do you know, by the way, on June 30th, was that one person of Blue Cross insured? I don't know that. Then I guess you don't know of the four people today who are hospitalized. You don't know whether any of them are Blue Cross insured. I'll take you up on your invitation and ask Paul Schultz about the projections of the number of people that will be hospitalized. Right, so you're going to make a projection as to the number of people who will be hospitalized because of the coronavirus for the next year, correct? That's Paul Schultz's job. One of the things that I said in my pre-file testimony is that future projections are very difficult to make. You didn't make them? No. Okay, but you did make a projection as to how many people are going to come back and get care that was deferred, right? Yes. Okay, so how did you do that? For example, in that you projected that 100% of the people would reschedule all laboratory services, all radiology services, all durable medical equipment. That's like the scooters you see on TV that they sell on late 1980s, right? That's durable medical equipment. So that's not actually, we didn't do that. Okay, would you please turn then, Dr. McIntosh to exhibit 17, page 19. While we're getting there, can I just ask, does anyone else bring an echo? Yeah, yes. So if everyone could just make sure their line is muted except for Jay Angoff and Dr. McIntosh. That might help. So as you will see this, what we did was we looked at chronic illness and we looked at acute illness. So in our numbers, and I'm sorry, I am, and when I mute myself. Should we turn? Dr. McIntosh, I'm sorry. I was having trouble hearing you were breaking up. Mr. Barber, can you hear me? I can hear everyone, but I'm getting a pretty wicked echo. I'm wondering if we should try to figure out who it is if we could have Dr. McIntosh and Mr. Angoff vice versa. Okay, could you mute your line and then Dr. McIntosh could you try speaking? So when we, it's only slightly better, sorry. When we did the goodness numbers, we looked at audiology that happened, for example, as a result. I'm sorry, this is a reporter. I am having a very difficult time hearing you right now. The echo is coming all over. Why don't, I guess, Christina, do you have any suggestions on that? First, I thought it was Jay's mic and it seems not to be that. So people could rejoin and maybe Kate and Jay, but because I see everyone else is muted and then of course on the phones, I can't tell if people are muted or unmuted by phone. So someone participating by phone could be the issue, but I can't tell. So I just called in. Is that any better? Yes. Okay. So I'm afraid that the recording may not pick me up as a result, but I called in on my phone instead. Can you get a little closer to your phone? So increase the volume just a bit. Yes. Hang on one second. It's not the most attractive look, but hold on. Is that an improvement? That's better. Yes. Thank you, Dr. McTush. So what we did when we were looking at our numbers was we asked ourselves what conditions are going to go away and are not going to come back. So for example, if a patient was seen in the emergency room and they had, if a patient would have been seen in the emergency room for influenza back in April and they chose not to go to the emergency room, then they were not going to come back in June for that emergency room visit that they missed in April. Does that make sense? Whereas, so if they had gone to the emergency room in April for a sprained ankle, for a chest x-ray for an acute illness, for anything that was not going to reoccur, if they had had pregnancy care, that was not going to come back because the baby has arrived. They're not going to show up in July for pregnancy care that they missed back in May. Same with the acute care that has to do with acute illness, but if they have a chronic disease where, for example, they need regular CAT scans to follow up their illness, for example, they have cancer and they need regular CAT scans to surveil for recurrence of illness, or if they have an ongoing condition that requires monitoring of blood work, that those were going to return 100%. So, or close to 100%. And as I said earlier in my testimony, that 95% to 100%, that was not relevant. So, you know, it pretty much is going to come down in the same way. So, those were the sorts of decisions that we made. So, for example, with immunizations, we decided that immunizations, that we hoped that they would come back all the way. We weren't entirely sure that they would, but we hoped that they would come back all the way because there is a national concern about the decrease of measles vaccine as a result of the pandemic and concern that we will get concurrent cases of measles along with our COVID-19. Okay. Please tell me if I'm causing an echo or anybody can't hear or I'm breaking up. But Dr. Mcagosh, how did you decide that 100% of all lab work would come back and 100% of all x-rays? How did you decide that? You mean how did we decide that 100% of the chronic x-rays would come back and 100% of the laboratories? No, you don't say chronic. You say 100% of both chronic and other radiologies going to come back and 100% of both chronic and lab work are going to come back. What did you base that on? Did you base that on experience? Did you base that on any studies? How did you come up with that 100%? So, when we did our numbers, we did not decide that acute radiology and acute laboratories were going to come back 100%. So, I am not the submitter of the articles that you're talking about. So, I would suggest that you talk to Paul about what is on the page. But when we did our modeling, we assumed that chronic radiology for chronic disease would come back at or close to 100% and chronic laboratory monitoring for chronic disease would come back at or close to 100%. And that acute care which had resolved would not come back. Okay. So, if this has 100% for both, that's inaccurate. That is, if this has 100% for both chronic and other, that's inaccurate. So, you would have to talk to Paul about the definition of laboratory other because I cannot make the assumption from looking at this that laboratory other means acute care. So, I did not submit this. So, I would encourage you to talk to him about that. That's fine. I will. Dr. McIntosh, under what conditions, if any, does it make sense to compare the course of the coronavirus in New York City? Start that. Under what conditions of any, does it make sense to use the course of the coronavirus in New York City as an indicator, a potential indicator of what the course of the coronavirus could be in Vermont? This is a brand new disease. It is an emerging illness. We know almost nothing about it. It has been in our lives since January or perhaps December of 2019 or January of 2020. The amount that we do not know about this illness is unbelievable. It is behaving in ways that we would never have thought possible. In March, we thought this was a respiratory virus. Now we know that it's much, much more than a respiratory virus. Now we know that it is a vascular virus, that it inflames blood vessels, that it impacts the individual anywhere it touches them, whether it is in their brain, whether it is in their feet, whether it is in their lungs, whether it is in their heart, whether it is in their kidneys. It causes kidney failure, heart failure, long-term strokes, long-term disabilities, severe illness, prolonged intensive care unit stays, and we know almost nothing about it. So are you saying that we can be naive to assume that we can discount the experience of any state, just as it would be naive to assume that Vermont will be immune because we somehow are special? Dr. McIntosh, what's the population of Vermont? 600,000 people. Dr. McIntosh, what's the population of New York City? More than that. It's about 8 million, isn't it? I don't know, honestly. People are packed closely together, aren't they? Again, remember, the importance here is not the absolute number of cases. It is the number of cases per capita because what it takes to overwhelm our facilities is very different from what it takes to overwhelm the facilities of a much larger metropolitan area. In the report that you worked on with Paul Schultz, and Paul Schultz is the one I should ask about this, I'd be happy to. Do you know why did you all use New York and Albany and Boston as comparables to Vermont with 600,000 people rather than New Hampshire and Maine or Nebraska or the Dakotas? Why did you compare Vermont to the places that have had some of the worst outbreaks and had the most densely populated populations in the country? Was that a fair comparison? Were they really comparables? Again, I would defer to Paul for those reasons, but I would reiterate that it is critical for us in Vermont to gather information from every possible area that we can because we know so little about what this virus is capable of doing. Okay, just a couple more questions, Dr. McIntosh. You're projecting that a vaccine will be available in 2021. Is that right? By the end of what did you say? What would you project as to when a vaccine would be available? I'm not sure we put a firm number on a vaccine projection because I don't know that anyone can put a firm number on a vaccine projection. Okay, could you please turn to page eight of 14 of your pre-file testimony? That's exhibit 13. Are you there? No, not quite. Okay, so you see at the last question, what's the potential timeline for a vaccine for COVID-19? And you see there the second, the third sentence says that the prevailing hope is for the National Institute of Allergies to develop and implement the vaccine by the end of 2021. Do you see that? Yeah. Okay, so how realistic is that in your view? It is a prevailing hope. It is the prevailing hope of the National Institute of Health and it is a prevailing hope. Okay, then I assume you don't believe that it's a realistic possibility for a vaccine to be ready to go at the beginning of 2021? Honestly, there are many people much, much smarter than I who would have opinions on this, but I am not able to. The entire world is working very hard to find a vaccine solution, but any vaccine solution also requires being rolled out. And it is a prevailing hope among the folks who know way more than NIH that this is the timeline, but I would not even pretend to be enough of an expert to be able to give you any kind of projection. Dr. Matatosh, do you know how much Blue Cross has paid out in 2020 because of the coronavirus? I would defer that to Mr. Schultz. Very good. Thank you. I have no more questions. Okay, next we'll go to the board and then opportunity for redirect. So I'm going to call on individual board members just because of the setting. So I'm going to start with member Holmes. Okay, great. How are you doing, Dr. Matatosh? Good. Good. I actually just have one question for you. Thank you for your testimony. I appreciate it. And it was with respect to some of the work that you're doing to remove the low value care from the system, which I really appreciate. Do you have, actually I have a couple of questions around that. Do you have an estimate of how much of the care that's currently being delivered, you would say is low value care in Vermont? I would love to be able to have done that modeling for you. I haven't. I think that there is always disagreement about the definition of value, but modern models of healthcare do range. As I think you know, there are ranges of approximation. Some people say it's as much as 40%, others say it's 25%. I also think that it depends on the specialty. There are certain fields where there's more low value care. There are certain areas where there's more high value care. But I do think that this conversation about value is important and we need to have it. Is that something that you said that you wish you had modeled that? Is that something that you going forward are going to try and model at Blue Cross Blue Shield, the level, the degree to which there is low value care and if it varies by specialty, varies by hospital service area, things like that. Is that something going forward that you might be doing more modeling up? Well, we've already done a fair amount of it. We've done it for certain service lines and we've done it for laboratory, which is why we went with Avalon. We have done it to a certain degree with radiology, which is which we've already done. Many of our prior authorization policies are written based on a fundamental idea of value as opposed to cost. We are looking at what best practices are, but there is no cohesive push toward value-based care within the state as a whole. I think it's a wider conversation that we need to have at the hospital level, at the Green Mountain Care Board level, at the practice level, about what this, and at the ACO level, about what this move to high value care really looks like. Yeah, I hope we can have those conversations. So I guess with regard to that provider passport for radiology, I'm wondering what proportion of providers in your network have the passport at the 99, 98 percent level or have fit into that? Only 2 percent of their referrals were considered not high value care. What proportion of providers actually have the passport right now? So it's important to remember that the passport program only, we can only look at a pool of providers who order enough high cost tests to be able to fall into the category. So there are very few, if any, primary care providers on that. So it is by its nature a very low percentage because the most of the very high cost tests are ordered by specialists, so and most primary care providers don't order enough of the specific high cost tests that we're looking at to be able to even qualify. So we had to have a threshold at which we cut it off for, because you couldn't base your decision about whether someone provides high value care if someone only orders one MRI a year or two MRIs a year or two MRIs on different subjects, right? It had to be a pool of individuals who ordered enough of a single high cost test to be able to see that they were being effective or enough of a series of high cost tests in a particular category. So it is by its nature already a small program, but it's the kind of program that we really want to be able to push out further. But again, we need provider cooperation and buy-in to be able to have a global conversation about value and even sort of regulatory buy-in to have a global conversation about value to be able to push these things forward because it gets tricky when you get to the micro level. It's a great idea at the higher level, but it's very tricky at the micro level and we need everyone to buy in to be able to do that. Okay. All right, thank you. Mr. Chair, I see you have your hand up. Yes, I thought that I was supposed to do that. I do have questions. I can go at this time or whatever order you would like, Mr. Robert. I was going to give you the last shot, but you want to go now? Why don't you go now? Okay, fine. Good morning, Dr. McIntosh. I was fascinated by your testimony, especially on the specialty drug, and I can show you that I just had my fourth melanoma removed and wasn't even aware that there was a drug that could even treat a melanoma. But when I was a kid, we didn't know what sunscreen was, so that happens. What level of care in an emergency room would you consider to be inappropriate based on your professional knowledge? I'm afraid I don't understand the question. So for years, it's been good health policy to try to encourage some utilizers of emergency rooms to seek primary care oversight instead. And I'm just curious, one of the things that was hit the hardest during the pandemic was the use of emergency rooms. I'm just curious what level that you believe probably shouldn't have been there to begin with. Oh, I see what you're asking. So I think what I hear you asking is we saw a significant decrease in emergency room utilization of that how much didn't need to go and how much was individuals who might have needed care but chose not to go. I think the honest answer is we don't know yet until we study that. And I think places like New York City that saw a real decrease in their emergency room population are going to need to answer that question in retrospect. Because you're right, there is this question of how many people go end up in the emergency room because they're impatient and don't want to wait until tomorrow or because it's something that's more mild or because it's something that they're scared about but doesn't necessarily need to be seen and could be seen from a phone call or some other visit with a primary care provider. And then how many visits are critical? We did a grand experiment on New York City and we're now doing that same experiment in Houston and all over the rest of the country. But the answer to that question lies in the statistics and the study of it because it's a complex question and I don't have a particular answer for you. There are probably standardized numbers of how much emergency room care is felt to be low value but I don't have those at my fingertips. Okay so likewise we've heard a number of stories about fear in the minds of people that should be consuming care and aren't going. Have you seen any professional analysis of what that number could be as far as the population's fear of returning to a medical setting? I don't think that the individuals who are studying that have landed on a particular number yet. There's a lot of chatter about it and there have been a few changes in the mortality rate from the heavier hit areas that have been put in place. But I think that the jury is still out and the actual science has not really had time to do those numbers yet. That will come. We will know that but it may take several years. Dr. you testified that you haven't canceled any QHP members which is very good and thank you Blue Cross for putting in place that policy. Can you tell us how many members are in arrears currently and how the normal number would be this time of year? I cannot. I would defer you to Ruth for that because I'm afraid that is outside my purview. Okay and you spoke about the current number of cases in Vermont. Can you address the trends as far as hospitalization rates and death rates? So Vermont was very fortunate has been very fortunate with COVID. We have had a relatively stable death rate. I think we've maxed out about 56 and we haven't moved from there for a while. Our hospitalization rates are percolating along under five right now. But again it's important to remember that half success is not a guarantee of future success. Yeah and of those hospitalizations do you have any type of indication of what number of those would be Medicare patients as opposed to commercial insurance? I don't. The numbers of who is hospitalized are coming from the health department and they don't parse it by insurance carrier. So I think that Paul probably has more information for you on that but I don't have it at this time. So Paul would be the person to ask about the number of people that Blue Cross has seen as members hospitalized? Yes. Okay I think that's it that I have for questions Mr. Hearing Officer. Okay next we'll go to Member Pelham. Good morning Kate. Can you hear me? Yes. Good. So one of the things I struggle with in this whole process is the kind of diversions of the goals we have in the all-payer model especially in this instance the three and a half percent total cost of care you know and getting to within those guardrails around that number in 2022 and understanding that part of that pathway to that end is our investments in offsetting population health measures. So I just want to pick one that I've raised before and it just if I'm off base tell me but it just seems to me like a big miss and that has to do on you know page and you don't have to go you know go to the filing but on an exhibit one on page 16 on Blue Cross Blue Shield states that it continues to that and I'm quoting continues to evaluate areas to achieve savings and improve the health and experience of Blue Cross Blue Shield Vermont members and one area that I have some concern about is the Vermont's blueprint of health sponsors the CDC recognized National Diabetes Prevention Program lifestyle change program. The program focuses on nutrition and fitness to help Vermonters avoid diabetes. Vermont's Department of Health says if left untreated up to one in three people will with pre-diabetes will develop divide diabetes within five years. Pre-diabetes is treatable but most people with pre-diabetes do not know it and you know I know that Blue Cross Blue Shield has a program for diabetes which is in your marketing material you know estimated to cost about $7400 a year with at least for the bronze plan $51 a year coming out of the pocket of the rate payer but my question is does Blue Cross Blue Shield Vermont's QHP proposed plans support compensated access to diabetes prevention programs or benefits inclusive of nutrition counseling and fitness programs that parallel those recommended by the CDC. So all of our current plans put both benchmark both the benchmark and the non-standard support a wide range of options for diabetes treatment and prevention including nutritional counseling and the wellness drug list which includes diabetes medications. We also have the Blue Extra discount on many fitness options offering the cross the state. We recognize that our plan design can support members in our health and wellness goals and you're right I mean I think eventually the goal is to switch to a you know is to try to really promote the preventative model. So we are continuing to collaborate with the ACO and with the blueprint to develop and to offer targeted health programs for members. Also this year we're offering new non-standard plan designs that are specifically have benefits that are specified for members with a diagnosis of heart disease or diabetes and so we're trying to kind of take a tailored approach there to try to help with that help with that prevention. Well but my focus and the question is not diabetes it's pre-diabetes and so just a simplification if you know I were going to go to my primary care physician and they test me blah blah blah and they say you know Tom you're pre-diabetic you know and I said well doc what do I do about that and Blue Cross Blue Shield is my insurer. Is there a program that my primary care physician can send me to on an organized basis where I can you get the kind of program that the blueprint is running but knowing that the blueprint is running it on a shoestring I mean it's I've talked to people at the ground level in that program and they maybe get a thousand dollar stipend for a multi-week program but I don't find in the plan designs that are before us that there is a an organized program for pre-diabetes that engages nutrition. I can see the nutrition is for 90 bucks that you can get a two or three specialist visits but there's nothing having to do with fitness. So the nutritional counseling for pre-diabetes for individuals who are overweight there are an unlimited number of pre-diabetic visits for nutritional counseling for people who are overweight. With regard to to fitness that becomes the question of doing a sort of a full pre-diabetic program becomes an actuarial conversation. So the complexity of these chronic illnesses is something that would then have to be placed within the actuarial context of the cost of providing you know a fitness benefit. Okay and so in another area that's connected to this is the Vermont's benchmark plan and as I understand it that plan goes back to 2012 or 2014 and basically predates the all-pair model and it's it's targeted diseases, chronic diseases, etc. Do you have does Blue Cross Blue Shield have any interest in revisiting Vermont's benchmark plan to update it so that it is more consistent with the all-pair model and the goals of prevention embedded in the all-pair model? So as you know updating the benchmark is that plan is a substantial process and there are many stakeholders in it and we would very much like to be involved in and support any effort to do that but it is also worth noting that healthcare is moving toward a more tailored approach to medicine and given the complexity of individual chronic illnesses in Vermont it might be preferable to have a variety of plan designs to meet the needs of many different healthcare profiles rather than to require an identical benefit enhancement for all consumers. So you don't see much value in reopening the benchmark plan and just trying to align it if it needs alignment align it with the goals of the all-pair model? It's such a complicated model that I think I can't I don't think I would trust myself to say whether I agree or disagree at this time. Okay and I had one more in your area I thought that we were going to be asking questions all at one point in time so I'm scrambling here a little bit and if I can't find it in writing I can find it I can remember what it was. I was looking at the $600 kind of you know it was a no I might not know that's not you sorry that's not you I'm confusing him so that's that's good for me thank you for your answers. Okay thank you. Okay board member Yusufer. Good morning Dr. Macintosh. I just have a couple questions really talking about the drugs that you were talking about earlier and I guess the first one is do you have an idea of ballpark estimate of what what we spend on specialty versus generic versus how they're dispensed because I think when I was reading through that you know basically most of the prescriptions are generic versus the specialty but do you have any perspective on what those percentages might be? So it's important when thinking about specialty drugs to understand that there are specialty drugs that are considered biologic and specialty drugs that are not considered biologic and the biologic drugs do not have generics so I want to put that out there because some of the most expensive drugs do not have generics. Most of the specialty drugs come through the medical channel and not through the pharmacy channel because these are drugs that are infused often in hospitals or doctor's offices or in outpatient settings but they will come through the medical benefit rather than through the pharmaceutical benefit but not all of them some of the specialty drugs like the oral cancer therapy will come through the through the pharmacy. Okay and just talking about cost saving initiatives and programs you had on page exhibit one page 164 there was discussion about the civica rx the joint venture which looks to be I think in 2022 potentially and will be introduced in certain generic drugs and it said you know this should be a significant benefit to Vermonters with the cost for generics and just want to get an idea that you have any perspective on what that would do to cost what type of savings that would be I don't know if that would be your area or someone else's area to talk to. Yeah I'm going to I'm going to leave the actual conversation about numbers to Mr. Schultz but I do think that you know the civica rx is an exciting venture that we would like to be able to pursue again this is one of these areas of innovation that we would like to be able to go down to be able to to bring it in to administer it and to pass it on to the state of Vermont but as far as the actual numbers I'd like I will defer those. Okay and do you know of any other programs that you're involved with that could bring savings significant savings whether it's through admin costs you know and when those would take place? Again I would defer that to to Mr. Schultz because the I mean there are a series of things where I am I am looking at value but there are not necessarily things that I'm looking at with particular at a particular item cost so I will defer the cost questions to the finance folks. Okay thank you that's all I have thanks. Okay Board Member Lunge. Thank you. Hi Dr. McIntosh I hope you're well today. On the topic of cost containment initiatives in exhibit one on page 37 there's a discussion about a delay of some 2019 programs that you had talked about well witnesses from Blue Cross not you personally had spoken to last year and those included reducing inpatient emergency I'm sorry inpatient readmissions reducing ED admissions. I'm wondering if you're the right witness to speak to the delay in those programs. I am probably not unfortunately I'm sorry. No that's okay I'm happy to to ask someone else about that. On the discussion of the lab benefit it you testified that that lab benefit manager Avalon didn't use prior authorizations as the mechanism for improving and promoting high value tests and discouraging if you will low value tests so what exactly are they doing to do that is it educational how does that work? So Avalon it's important to say that Avalon has two business lines and at this time we only use one of their business lines and the business line that we use does not have prior authorization as a part of it and yes it is an educational approach their medical policies are applicable to their laboratories and their laboratory they work to educate their laboratories and their laboratories work to educate the providers on what constitutes high value care. Okay so they're not themselves reaching out to the providers they're reaching out to the labs and then it's between the lab and the providers okay thank you I just wanted that clarification so I could understand how it was actually working. In your pre-filed testimony which is exhibit 13 on page 13 you talked about the suspension of prior authorization for home infusion to allow increased utilization of that benefit during the emergency however home infusion was a one of the cost containment programs that was noted as being put on hold can you speak a little bit about the home infusion program whether you've seen increased utilization in that area and the future plans for it? So home infusion the home infusion process or the home infusion process the ability of a member to receive their infusion at home is different from what was referred to as being an initiative that was put on hold so the ability to receive home infusion exists in Vermont and what we wanted to do was to open that ability within Vermont in the in the course of the pandemic but that's not a sort of project to increase home infusion which is what was being referred to before. As to utilization and increased utilization I'm afraid I don't have numbers on that okay at this time as to what as to whether there was an increase in home infusion during during COVID but we do believe that home infusion ultimately is safer for the member because they aren't exposed to things they might catch in the hospital and that was true before COVID and it's doubly true now. Okay and can you explain how the I mean I understand how home infusion is available in Vermont but what is the difference between that and the program that was put on hold that's still not clear to me. So I have not been involved in the design of the program that was put on hold so I'm afraid I can't speak to that. Okay thank you sorry I'm also finding my questions. I wanted to turn to telemedicine for a moment and some of the efforts that Blue Cross has done to open up the telemedicine including the phone availability during the pandemic. In your pre-filed testimony again I believe it's on page 13 you spoke to the preferred telemedicine provider that should be online six is that Amwell? Yes that is okay and is Amwell national provider what can you tell me about Amwell? Amwell is a national provider but I think that it's important to note that the percentage of visits that we have with Amwell is in the very very low single digits it's less than five percent and we did not see a substantive increase in the COVID-19 so in the vast bump of in telemedicine I think I actually presented you those last several months ago the vast increase to millions of dollars that we have seen in the utilization of telemedicine we have really we have not seen an increase in the use of our external vendors so the telemedicine increase that we have seen has been overwhelmingly and almost exclusively Vermont-based providers providing telemedicine. Great all right thank you so when I'm glad actually glad to hear that Amwell is not highly used because my next question was going to be how do you ensure that there's a connection back to the primary care provider which I know is something that you are passionate about as a former member of our primary care advisory committee? So yes Amwell does send those records on but at this point it is it really has been a non-issue well rather you have to give permission right for the records to be sent on so the if the patient provides approval that can happen but the patient has to provide approval and but the but the vast majority of telemedicine this has not applied it has really been it has really been local Vermont providers providing care to Vermonters. Great how did how did you take telemedicine into consideration when you were looking at the deferred care numbers and the modeling for COVID? We really didn't the telemedicine what is interesting about telemedicine is there are very specific areas where we have seen almost no decrease in care mental health for example is one of them they made a very rapid shift to to mental health but when it comes to trying to distinguish whether a provider was going to provide care by telemedicine or by or by office visit in person we didn't really take that into account because there is the the payments are on par the audiovisual telemedicine and the and the and the office visit are are on par so the volume of patient visits is the volume of patient visits and there was a little bit of a drop-off that we did compensate for that to say that we thought people would be coming back into the office or become more comfortable with telemedicine but beyond that we really didn't we really didn't sort of say is telemedicine going to impact this in any particular way. Okay great thank you um let me just check my notes and I think I'm almost done so when you testified a few minutes ago about the surgeon mental health claims that includes the the telemedicine claims absolutely yes great um and then what is your source of information for providers adding hours on weekends or evenings? So we have had reports from various hospitals from private practices that we've talked to regarding specifically with regard to procedures that extra hours have been added um you know surgical suites you know being run on the weekends things like that. And how many providers did you speak with? I don't have those numbers because I did not do that initial outreach I will have to defer. Okay thank you I'm done thank you. I'm all set. Okay thanks Robin. Do any board members have follow-up questions before I turn it over to Ms. AC for redirect? I'm not seeing any takers. Okay Ms. AC do you have any redirect for Dr. McIntosh? Just briefly thank you Dr. McIntosh uh if you could take a look at exhibit 6 page 47 can your binder please um so this is is this a different version of the chart that Mr. Angoff was directing you to? Yes it is. And if you look at just for example the percent rescheduled services for laboratory and radiology could you look at those numbers please briefly? Yes. And what did those what did those numbers say? Those numbers show that chronic laboratories are expected to come back at 100% and other is expected to come back at 0% and that radiology chronic is supposed to come back at 100% and for radiology the other is supposed to come back at 0%. And how do those numbers comport with your understanding of your input into the modeling? These numbers are consistent with the input into the modeling that we performed. Would you leave it to Mr. Schultz to explain the difference between this chart and the one that Mr. Angoff directed you to? Uh yes I would. I have nothing further at this time thank you. Okay thank you Mr. Angoff. Your video is off but do you have any redirect or are you sorry recross on that on that issue? Just one. Dr. McIntosh do you know which chart is right? The one that I showed you or the one that Ms. Asate showed you? I would leave it to Mr. Schultz to describe the difference between the two charts but what I will say is that exhibit 6 page 47 is consistent with the conversations that he and I had and what I described to you earlier as our thought process. An exhibit 17 page 19 that is not consistent with what you understand the survey that you participated in to be based on. Again that chart was not submitted by me and therefore I will leave it to Mr. Schultz to explain that chart in particular. Okay that's all I have. Okay I got some feedback that we should take more breaks this year so we're going to take a break to 9.55 just get a drink of water stretch our legs before we move on to the next witness. Okay so I'm going to start by swearing in Mr. Schultz could you please raise your right hand? Do you swear or affirm that the testimony you're about to give is the truth the whole truth and nothing but the truth? I do. Okay Mr. Denafio. Thank you Mr. Barber and good morning to the board and Mr. Engoff and good morning Mr. Schultz. Would you please state your name and occupation for the record? Good morning my name is Paul Schultz I am the chief actuary for Blue Cross Blue Shield of Vermont. Did you prepare and submit prefiled testimony in this matter? Yes I did. Would you identify your prefiled testimony by exhibit number in the binder? Yes my July 7th prefiled testimony is exhibit 11 and my July 13th supplemental prefiled testimony is exhibit 15. Was all the testimony contained in those two exhibits true and correct to the best of your knowledge at the time you submitted it? Yes it was. And is it so today? Yes it is. Thank you. I'd like to ask you a few questions to quickly recap the rate filing that's under review in this case. Were you responsible for preparing Blue Cross Blue Shield of Vermont's 2021 Vermont individual and small group rate filing which is currently under review? Yes I was the filing was prepared under my supervision and I am familiar with all aspects of the filing and the underlying rate development. And did you certify the filing? I did at the time of the filing I certified that it meets all applicable actuarial standards of practice and that it also complies with all applicable state and federal laws and regulations and that certification still holds true today. Would you please summarize the proposed rates contained in the filing? Yes the rates as proposed would produce an average increase of 6.3%. And would you please summarize the key drivers that resulted in the proposed rates? Yes one of the key drivers again this year was specialty pharmaceuticals. That accounts for about 3.7 percentage points of the total 6.3% rate increase. As we heard from Dr. McIntosh these are drugs that save lives. They improve quality of life and in some cases they improve long-term affordability but they are very expensive. Especially drugs that count for about two-thirds of what we pay for all pharmaceuticals at this point. It's a staggering number and that is split pretty evenly between the medical benefit and the retail pharmacy benefit. In the absence of state or federal legislation that limits the cost of these drugs we do need to include them in the premiums. This is one instance where we are prioritizing access to care over affordability. More broadly in the app in the we would be filing a trend increase of about 9.2% in the absence of actions Blue Cross took to mitigate that rate increase and in the absence of the repeal of the federal health insurer fee. Actions Blue Cross has taken working in conjunction with our lab and pharmacy benefit managers saved about five million dollars from the proposed premiums. Mr. Schultz on July 14th Michael Barber the board's general counsel sent a letter to Blue Cross setting forth some questions that board member Pelham had provided in advance to allow Blue Cross some some advance notice to prepare for those questions. Did you have a chance to review that document? Yes I did. In board member Pelham's fourth question it was a three-part question and I'd like to ask each part so that you can provide some some testimony in advance to board member Pelham in the event he wants to follow up during his during questioning time with the board. The first part of his question asked has and I'm reading verbatim now quoting from the document has BCBSVT observed over the past year and in its current trends analysis that the relationship of the cost shift to trends affecting premium rates has improved or deteriorated. What is your response to that question? Yes we've seen that premiums have continued to deteriorate because of the cost shift. We were able to use data that's published by the Green Mountain Care Board to estimate that 35 percent of all commercial payments to hospitals are due to the cost shift and if we were able to fully eliminate the cost shift for Vermont hospitals premiums would be lower by about 17 percent. Now of course the cost shift also impacts Vermont independent physicians out of state providers ancillary services retail pharmaceuticals but we don't have any public sources of data available that would help us estimate those impacts on the premium. The second question within board member Pelham's question four asks and I'm going to read verbatim again here is BCBSVT tracking Medicaid caseloads given the economic impacts of COVID-19 to gain insight into possible changes in the cost shift driven by higher Medicaid caseloads. What is your response to that question? So as part of this filing we filed unit cost increases under the assumption that hospital commercial rate increases would be approved at the same level they were approved last year. If in fact commercial rate increases are approved at a higher level whether that's because the cost shift is increasing due to a higher Medicaid caseload or for any other reason then these rates would also have to be increased as Lewis and Ellis recommended. And the third part of question four asks and again I'm reading verbatim from the document. If so what actions might BCBSVT take or recommend to mitigate the impact of the cost shift on commercial insurance costs and rates? What is your response to that question? So Blue Cross understands that the Green Mountain Care Board grapples with the cost shift every year as part of the hospital budget review and we are supportive of any action the board takes to reduce or reverse the cost shift. Question six in the document we received from the board asks whether BCBSVT can reconcile the difference between the cumulative operating loss of $31,626,277 for 2015 to 2019 shown in the actuarial memorandum and the cumulative underwriting loss of $19,393,749 shown in line 11 of the supplemental health care exhibit which is exhibit 20 in the binder. What is your response to that question? Yes so the supplemental health care exhibit is prepared based on statutory accounting. When we assess the performance by line of business we base that upon gap underwriting results. So those two different accounting treatments give rise to a number of relatively small differences in results but what's driving over 90% of the difference is that for the supplemental health care exhibit issuers are required to display an allocation of federal income taxes within the lines of business. The reason for that is that the MLR calculation which includes an adjustment for those taxes is driven off of the supplemental health care exhibit. However it wouldn't be appropriate when you're assessing performance by line of business to include the federal income taxes in that assessment. So we look at the gap underwriting results instead. Because federal income taxes have been negative for Blue Cross over that five-year period the loss reported in the supplemental health care exhibit is less than the loss that's reported in the actuarial memorandum or through underwriting results. Mr. Schultz if I could direct you to exhibit nine in the binder please. I'm there. And could you just identify that for the record? That is the Lewis and Ellis actuarial opinion. Please turn to page 23 of that document and direct your attention to the recommendations section that's just about halfway down the page. You see that. I do. Does your supplemental pre-file testimony which is exhibit 15 in the binder regarding Lewis and Ellis' recommendations still accurately reflect Blue Cross' position with respect to these items? Yes it does. Would you please summarize the proposed rates as modified according to Lewis and Ellis' recommendations? Yes as modified according to the Lewis and Ellis recommendations these rates produce a 5.5 percent increase as compared to 2020 rates. And with respect to the fourth bullet under the recommendations the utilization trend would you please explain why Blue Cross is not arguing against that recommendation today? Yes so Lewis and Ellis recommends that the utilization trend is reduced to 3 percent from the 3.6 percent that was incorporated into the filing. Both Lewis and Ellis and Blue Cross agree that it is necessary to normalize for population morbidity changes when performing a utilization trend analysis but we disagree on the best way to do so. So in light of the current social economic and health crises and to streamline the hearing we are electing to forego a complex actuarial argument between two assumptions that are similar and both reasonable. And what is Blue Cross' position regarding the third bullet which is entitled consider updated hospital budget information? What is Blue Cross' position with respect to L&E's recommendation in that regard? So we agree with this recommendation in as much as additional information becomes known about hospital unit costs. For instance the July 31st hospital budget submissions that information should be incorporated into these rates because we haven't seen the hospital budget submissions we don't know what kind of impact that's going to have on rates. We have been able to do some sensitivity testing as I explained in my prefiled testimony each 1% increase above last year's approved commercial rate would require an increase of about 0.4% in premiums in order to fund that additional hospital revenue. Mr. Schultz I'd like to turn to the modeling that Blue Cross has done around the COVID-19 pandemic. To begin would you just please briefly recap Blue Cross' purpose in performing the modeling? Sure. So it's impossible to know with certainty what kind of impact the COVID-19 pandemic is going to have on our claim costs in 2020 let alone in 2021 because nobody can foretell how the disease is going to progress. But what we can do is to model a number of scenarios and to calculate how those various scenarios would impact Blue Cross' medical claim costs and in turns its RBC. That's what we've attempted to do with this modeling. And are the results of the modeling process contained in an exhibit or exhibits in the binder? And if so would you just just give us the exhibit numbers please? Yes they are. Our original modeling is part of exhibit 6 and our addendum to that modeling, our refreshed modeling is in exhibit 17. Now you don't need to turn to the individual pages but did you hear the testimony earlier during Dr. Kate McIntosh's testimony regarding some confusion between information that appears at page 47 of exhibit 6 and at page 19 of exhibit 17. Do you know what I'm talking about? I do yes. Can you clarify what is shown on those two pages please? Yes so probably the easiest way to do so is to let you know that the exhibit I'm sorry the table in exhibit 17 is mislabeled. So I want to take this opportunity to apologize to the board and to the parties for that. Totally my fault that document is mislabeled. So as we're looking at the assumptions that we made for each individual category the place to find those correct assumptions is in exhibit 6. Now does that mislabeling that you described have any effect on the results shown in either document? I'll stop my question there. No it does not. The 51.7 overall result that is in exhibit 17 is accurate and the modeling that we did stemming from that result remains accurate. The problem is simply one of mislabeling. It is not a material issue. Would you please describe how you created and ran the model? Yes so as Dr. McIntosh testified I and my team worked with her to develop assumptions as to the portion of returning care that's I'm sorry the portion of deferred care that is expected to return. Under my direction my team also worked to develop assumptions for a myriad of other things such as the existence duration timing and severity of a second wave, the timing and efficacy of a vaccine, and the frequency and cost of testing among a host of other variables. For each of those variables we define parameters or instructions for a stochastic model and we did that by defining a range of reasonable results and a statistical distribution within that range. So informed by the statistical distribution the stochastic model then selects at random a point within the range of reasonable results. It does that for each assumption and then calculates the overall impact to Blue Cross' medical claim costs and in turn its RBC. We ran 10,000 simulations for each of five different scenarios as to the existence and severity of a second wave. This included a scenario where there is no second wave of illness or deferred care. This also included a scenario where the second wave looks exactly like the first wave did in Vermont. In other words the best job in the country of having low infection rates and low treatment costs and we included three other scenarios as well at varying degrees of severity so that we could understand how each of those impacted claim costs were RBC. Finally we ran 10,000 additional simulations where the severity of the second wave itself was a random variable. And does exhibit 17 reflect the the most up-to-date results of the modeling process you've described? Yes it does. Would you please describe the results? Yes so in in terms of claim costs what we're finding is that our 2020 claim costs are likely to be fairly significantly lower than what we had anticipated but the 2021 claim costs will be higher to an equal or greater extent. Altogether over the entirety of the two-year period the results range from a slightly favorable impact on medical claim costs to a significantly unfavorable impact on medical claim costs and specifically we found that there were really no scenarios where we would have a windfall if you will from significantly lower claim costs over the entirety of the two-year period. And could you describe the modeling results in terms of impact on Blue Cross's risk-based capital ratio? Yes the results with respect to RBC were similar. They really vary from a slight increase to a slight decrease by the end of 2021. Notably of the 60,000 simulations that we ran using a very broad range of assumptions, zero led to an impact of RBC that was an increase of more than 75 percentage points. Does the model incorporate all impacts to RBC of the COVID-19 pandemic? No it does not. The model focuses on the medical claim cost impacts to RBC. There are a host of other impacts that we describe within our response that's in exhibit six. Those include things like retail pharmacy utilization that we've observed as running much higher than expected through June. There are advances that we've paid to providers. There's uncollectable premium that may result from the extension of grace periods, suspension of fraud, waste, and abuse activities, and of course the pension losses. Taking collectively and but setting the pension losses aside all those other items collectively reduce RBC by about 70 percentage points. Please describe your approach in setting the assumptions that form the basis of the modeling. Sure so wherever we could we used Blue Cross specific data or Vermont specific data to develop our assumptions and to develop our ranges. For example, for deferred care, returning care, and treatment costs we used information that was gathered from Blue Cross Blue Shield data and from our hospital contracts. We then vetted these assumptions against ranges that have been published in other national actuarial studies to verify that the ranges were reasonable. Where we didn't have sufficient data in Vermont or within Blue Cross Blue Shield of Vermont we borrowed ranges from these national studies or other published literature. We also vetted these ranges about against what we do know about Vermont and about Blue Cross Blue Shield data to verify that it's appropriate to use those ranges when doing a projection that's specific to Vermont. And in this context of creating and and selecting these assumptions what is the term conservatism or conservative mean? In that respect a conservative assumption would be one that produces more unfavorable impact to RBC than a best estimate assumption. And did you incorporate conservatism or conservative assumptions in the way you just defined that term into the assumptions that feed into the model? No, we didn't. That would be antithetical to what we were trying to accomplish with the modeling. If we had put our thumb on the scale, if you will, we may have come up with answers that had maybe a 25 point worse impact on RBC. But those 25 percentage points wouldn't have changed any of our conclusions. So it was our intention to use the best estimate of some, the best assumptions we could come up with and not to include any conservatism. While we're confident that there was no conservatism in our original modeling, we did do a lot of work between the original modeling and the addendum to eradicate any perceived conservatism that might have still existed in the modeling. So if you saw from the original model to the updated model, if you saw to eliminate any conservatism that might have crept into the original model, why is it that the updated results appear slightly worse? That's because we also incorporated June data. June data became available in time for us to do the modeling addendum. It was not available at the time we did the original modeling. What that June data showed is that June is emerging at a level of medical claims that is higher than what we would have expected from historical norms. We weren't expecting medical claims to be higher than benchmark levels until July. So this was rather surprising to us. But what it shows is that Vermont hospitals and providers are already operating at or above capacity. When we incorporated that data into our modeling, what it showed is that our estimate for the total amount of care that has been deferred is only about 20 million dollars for these insured lines of business. That 20 million dollars is about 90 percentage points of RBC. So when we incorporated that lower amount of deferred care into the model, that produced less favorable results relative to RBC. The other piece of information that we incorporated was the recent guidance on testing from the Vermont Department of Health. Based upon that guidance, we actually reduced our assumption for the incidence of testing, but the cost of testing increased because we would be adding the cost of an office visit to most testing that Blue Cross has to pay for. Mr. Schultz, are you familiar with exhibit 10 in the binder, which is DFR's solvency opinion and the accompanying Oliver Wyman report to DFR on that topic? I am. Did Oliver Wyman have an opinion about the existence of conservatism in Blue Cross's modeling, and this would have been the initial model, correct? Yes, that's right. Oliver Wyman did perceive some conservatism within our modeling, particularly with respect to our assumptions as to the amount and timing of returning care. They also alluded to studies performed by other issuers that resulted in a more favorable impact to RBC than our modeling showed. Would you explain whether you disagree with that opinion, and if so, why? I do disagree with that opinion. Specific to the portion of care expected to return, the assumptions that we are using are very well aligned with assumptions that have been published in other national actuarial studies, such as the one published by Milliman and also a society of actuary study. In terms of the timing of that return of care, before we had ability to see the June data, it's certainly understandable that we may have doubted that Vermont providers might be operating above capacity as early as July. Now that we can see the June data, we see that, in fact, that began happening in June. So we feel quite confident in the assumption that that will continue into July. With respect to what other national carriers are seeing, I can't comment on those studies because I don't have any access to them. What I can say is that this modeling represents a reasonable range of results based on best estimate assumptions specific to Vermont and to Blue Cross Blue Shield of Vermont. And do the results of Blue Cross' modeling lead you to conclude that any decreases are warranted in the proposed rates? They do not. The modeling shows that the impact to RBC over the entire two-year period is expected to be relatively small in the upward or downward direction. The modeling also shows that claim costs in 2021 are likely to fairly significantly outpace the 2021 claim costs that are included in this filing. Because of those results, we cannot responsibly reduce these premiums below actuarially sound levels. And do the modeling results lead you to conclude that an increase in the proposed rates would be warranted based on the results of the modeling? The answer here again is no. Blue Cross has committed to shield Vermonters from the additional costs related to the pandemic by paying for those costs out of surplus rather than passing them along through premiums. This is not a typical approach for an issuer to take. At the time we initially filed, we didn't have enough information to estimate what kind of impact the pandemic was going to have on 2021 costs. But we did know enough to believe that it was likely to be an upward impact on claim costs. So what we filed at the time, we were able to satisfy actuarial standards of practice because we have been instructed by senior management that any increasing claim costs due to COVID should be offset by an equal and opposite decrease in CTR, such that we get back to the same answer. Now that we have the benefit of our COVID modeling, we are able to actually put some estimates together and see what that actually would have looked like. So we can see based on the COVID modeling that 2021 claim costs are expected to be at least $9.6 million higher than what we had within the initial filing. So if I were to refile today, in the absence of the direction from senior management to offset any increases with CTR, I would have filed a 9.7% rate increase. But because of that directive from senior management, I would have lowered the CTR to negative 1.6%. And that would have gotten me back to the same 6.3% that I originally filed. All of this is before consideration of the L&D recommendations. So to say that a little bit differently, Blue Cross is absorbing 3.2% of premiums in order to shield rate payers from increased costs due to COVID-19 in 2021. That is no different from a 3.2% annual premium discount. And it's no different from a $10 million rebate. Now, does the modeling that you performed provide any insight into the current revenue shortfalls that providers are experiencing right now? Yes. What the modeling shows specific to Blue Cross is that we cannot look at the unexpected operating gain that we experienced from March through May in isolation. When we're considering 2021 rates, it's important to take a longer view of the ultimate impact of the pandemic. Similarly, in terms of hospital budget revenue, of course, it's important to recognize and manage the hospital revenue so that Vermonters have access to the right care at the right time and the right place. But as we're making regulatory decisions about hospital revenue, again, it's important to not just look at where we are at a moment in time, but to consider our best estimate of what's going to happen over the next two years due to the pandemic. So specifically, we saw in looking at the June data in our modeling that care from March through May that had been deferred is already returning. Vermont hospitals are already operating above normal capacity. Obviously, that's going to have an impact on hospitals revenue outlooks. And it's important to consider a long-range viewpoint on that impact as opposed to just looking at a particular point in time and drawing conclusions based on what's emerged to date. Would you please turn to exhibit one, page 163, and I'm using the red page numbering down in the lower left-hand corner of the page. Yes, I'm there. Okay. What document are we sort of in the middle of here? We are in the middle of one of the attachments to the original rate filing, the original actuarial memorandum. Which attachment? Attachment C, I believe. Thank you. And in the middle of the page, do you see the table there on page 163? I do. Would you please explain what that table represents and what it shows? Sure. So this table shows historical financial results for Blue Cross Blue Shield of Vermont within the individual and small group line of business, the topic of the rate filing today. I can talk about each column in the table. The filed contribution to reserve is just what it says. It's the CTR that was included at the time of original filing for each of those years. The approved contribution to reserve is our best estimate of our expected CTR after rates had been reduced for reasons other than those that were actuarially sound. For example, if our CTR was explicitly reduced, that would reduce our expected CTR. If other assumptions were reduced, but in a way that diverged from actuarial soundness, that also would impact the approved contribution to reserve or our expected contribution to reserve. To the right of that, we have the actual contribution to reserve. Now, these numbers are going to be different from what you'll find if you look at our financial statements. And the reason for that is one of timing. What we've done is to reallocate any events that arose for a particular year until a later year. By way of example, in our 2015 financial statements, we recognized a $4 million favorable true up for 2014 transitional reinsurance. That $4 million for purposes of this table was removed from 2015 because it actually arose from experience in 2014. So we moved it into 2014. This allows us to have a true view of what performance was on a year by year basis. And does the table show the final 2019 numbers as based on the information available to you today? No, it doesn't. This table was published before we received from CMS quite recently the final amount of the 2019 risk adjustment transfer from MVP to Blue Cross. That transfer is actually a little bit less than what we had anticipated at the time of filing. So our 2019 actual result, as known today, is negative 0.7 percent as opposed to the negative 0.4 percent that's reported in this table. Does the table include the anticipated income or recovery from lawsuits that Blue Cross Blue Shield and Vermont is currently engaged in against the federal government, the risk corridors case and the cost sharing reduction case? Yes, it does. It includes both. So even though those cases haven't reached a conclusion, we did include the expected settlement amounts within this table, specifically that's the risk corridors amounts in 2015 and 2016 and the CSR settlement amounts in 2017 and 2018. What can you conclude by comparing the approved and actual columns of this table? Well, a few things. For starters, I can conclude that my team has done an amazing job of accurately predicting what costs are going to be in these lines of business. I can see that over the past three years, we haven't been off by more than three quarters of a percent in any one of those years. It's a very strong result. Because of that accuracy in our projections, we can see that any rate cuts that are below actuarially sound levels lead to rate inadequacy. Who covers the shortfall when rates are inadequate? Policyholders do. If rates are inadequate, those shortfalls need to be paid out of policyholder reserves. DFR has mandated that our policyholder reserves must remain within a specific level. Therefore, any shortfall that results from underfunding current rates needs to be replenished by charging higher rates in the future. So in that way, rates that are lower for current policyholders must be made up for by future policyholders. So is affordability served if rates are set at inadequate levels? No. All this does is to shift costs from current policyholders to future policyholders. Can rate reductions be justified on the grounds of affordability? Yes. If we're in a circumstance where filed rates are excessive, then reducing those rates does not actually deplete reserves. And if we don't deplete reserves, then future policyholders do not need to pay more in order to replenish those reserves to the level mandated by DFR. And has that type of rate cut occurred since 2014 when the board began regulating these rates? It has. If we look at the results in 2014, we can see that the filed CTR was reduced from 1% to negative 0.1%. But actual results came in at the 1% that was originally filed. So in 2014, rates were reduced. But it created no shortfall in reserves because actual results came in at that 1% level that had been originally filed. Now, how have the board's rate decisions since 2016 impacted Blue Cross's RBC? In every instance where rates were cut below actuarially sound levels, it's led to rate inadequacy and reductions in RBC. And can you explain what the impact on policyholder reserves over that period of time is? Yes, I can. So we can calculate that impact by comparing the filed contribution to reserve to the greater of the next two columns, the approved contribution to reserve or the actual contribution to reserve. And I say the greater of for a couple of reasons. One is that if actual contribution to reserve performs better than expectations, then there is no reduction in surplus that we need to take into account here. For example, in 2014, as I just described, even though rates were reduced below levels that appeared to be actuarially sound, actual results came in better than that. So RBC was not reduced. Similar, but on the flip side of that, by using the maximum of those two columns, we are not ascribing to rate cuts any downturns in performance that Blue Cross might have experienced. In other words, performance that was worse than expectation. So if we look at 2018, for example, the actual CTR of minus 1.6 was worse than our expectation of minus 1. That difference of 0.6 was not due to the rate cuts. That was due to a downturn in performance. So focusing only on the value of any reductions in rates below actuarially sound levels, we can calculate that over all of these years, RBC has been reduced by about $24 million or 112 basis points of RBC due to cuts below actuarially adequate levels. And what would those results be for the time period 2018 to the present? We can use the same approach to calculate this for the last two years, and we can see that RBC has been reduced by about $15 million or 71 percentage points. And so where would Blue Cross's RBC be but for those 2018 and 19 results you just referred to? It would be 71 percentage points higher, which at the end of 2019 would have put us within our mandated RBC range. And when you say mandated RBC range, can you just briefly describe what that means? Yes, DFR has mandated that our RBC should be within a range of 590 percent to 745 percent. And if we are below or above that range, we need to submit action plans to them to describe how we intend to return to the mandated range. Does setting Blue Cross's rates below actuarially justified levels provide Blue Cross a competitive advantage? No, it does not. We are of course very concerned about the ongoing membership losses and we are concerned about our rate differential between us and MVP. But while we are taking every step that we can to try to address those issues, such as our good work with the lab benefit manager, we need to be in a financially sound position in order to invest in that new programming. When rates are cut below adequate levels, it compromises our RBC and our surplus and reduces or eliminates the capital that we need to invest in innovative solutions. So when we can't invest in those innovative solutions that will actually bend the cost curve by improving health care delivery and outcomes, we are unable to make health care more affordable for Vermonters. And it's those same steps that would reduce our premiums and improve our competitive position as well. But wouldn't premiums be lower if you could have retained more members? Well, our administrative costs would have been lower if we had retained all of our membership in 2020. In this particular filing, premiums would be lower by about 0.2 percent because of the administrative costs being somewhat lower due to higher membership. However, we can see that the membership loss had no overall impact on our rates. The reason we know that is not only through our actuarial analysis, but because we can see that we filed for a lower rate increase than MVP did. If membership losses were driving rates upward or downward between the two carriers, then the issuer who is losing membership wouldn't necessarily file a higher rate increase than the issuer that's gaining membership. That's not the case here. Our rates are increasing no more quickly than our MVPs. So we can conclude from that that the membership losses do not have a material impact on 20-21 rates. I'd like to turn your attention now to exhibit one page 18 of the the red numbers on the lower left-hand corner of the page. And when you get there, I think you'll see that that section 1.8 of the actuarial memorandum that accompanied the filing. I'm there. And do you see at the top of section 1.8 where it lays out the statutory criteria that the board applies in this proceeding? I see that. Would you just read that passage into the record please? Sure. When reviewing a proposed rate, the Green Mountain Care Board must consider whether a rate is affordable, promotes quality care, promotes access to health care, protects insurer solvency, and is not unjust, unfair, inequitable, misleading, or contrary to the laws of this state. In your professional opinion, are the proposed rates as modified according to Ellany's recommendations inadequate? No, they are not. Excessive? No, they aren't. Unfairly discriminatory? No. Reasonable in relation to the benefits provided? Yes. Unjust, unfair, inequitable, misleading, or contrary to law? No. Are they affordable while promoting quality care and access to care? Yes. These right rates strike the best available balance among those three interdependent variables that are in tension with each other. And do they protect Blue Cross's solvency? Yes. Have you reviewed the public comments that the board has been receiving over the pendency of this proceeding? Yes. And those comments show that many Vermonters are struggling right now to pay for their health insurance, right? Yes. In that context, how are you able to conclude that these rates strike the appropriate balance, or I think you said the best balance available, among affordability, promoting quality, and promoting access to care? Well, in a couple of ways. First of all, these rates, as with any health rates in Vermont, need to be assessed on the basis of the total population or community that purchases these plans. We can't derive these rates based upon individual circumstances. In fact, we are prevented from doing so by Vermont law. So by way of example, I cannot construct a rate for a 30-year-old who might have somewhat lower income and few health conditions that's different from a rate for a 60-year-old who might have higher income and a whole host of medical needs. Vermont community rating laws do not allow me to develop rates that are different for those two individuals. The rate must be the same for the entire community. So because of that, we have to consider affordability on a community level, rather than thinking about it from an individual, very specific level. The second thing that I can think about is how our cost of insurance compares to that of the rest of the industry. These rates consist of really three main parts. First are taxes and fees. Those are set by the government. Issuers have no control over those amounts. Second, and this is the majority of the rate, are claims. Claims that their essence or amounts that providers are paid. So while Blue Cross does everything that we can to try to bend the cost curve, whether that's participating in Vermont's various initiatives or developing programming of our own, at its core, that portion of premium is really a financial transaction wherein we are receiving premium payments from Vermonters and we are redistributing those payments to providers to pay them for the care that the policyholders are collectively consuming. So that leaves us with the cost of insurance, which I'll define as the sum of administrative costs, CTR, and profit margin. Now this is one place where we can exercise significant discretion because we have a lot of control over our administrative costs, our CTR, and our profit margin. L&E has looked at and analyzed where we stand relative to other carriers for those elements. What they found is that in terms of administrative costs, our administrative costs as a percentage of premium are lower than 90% of the plans that they assessed alongside of us. In terms of CTR, our filed CTR in 2020 of 1.5%, which is our same filed CTR this year, was lower than 80% of all individual and small group filings nationally. And of course, as we all know, there is no profit margin in these rates. So our cost of insurance is among the very lowest in the entire industry. Mr. Schultz, would you please turn to exhibit 23? Yes. And when you get there, please explain what this is. It's a lot of pages to flip over. Yes. Okay. So this graph is a comparison of Blue Cross, Blue Shields, MLR over time as compared to the average MLR across the entire industry from the years 2011 through 2019. The blue line shows Blue Cross's actual MLR results. And this is derived from the underwriting results that I described earlier in terms of how we assess performance by line of business. The red line is taken from a Kaiser Family Foundation study that we cite in the second footnote. Mr. Schultz, I'm looking at a black and white copy. Just in case anybody else is, would you please describe sort of visually which line is the Blue Cross line and which line is the national average line? Yes. The Blue Cross line is the flatter line. It starts and ends above the other line. The national line is the one that kind of has a big spike up followed by a big spike down. That's the national line that I refer to as the red line for those of you with a color copy. And so the national average line you said is derived from a Kaiser Foundation study. Can you just say a little bit more about what that study was and how you found it? Yes. I found it online. The Kaiser Family Foundation does an awful lot of very interesting reporting relative to this line of business. And I try to stay abreast of that reporting. So in reading a study that they did about how the issuer MLR has changed over time, and as that may relate to ACA rebates, I found and read this study. I found the graph and thought that it would be useful to compare to Blue Cross' results over the same time period. So the national average line that appears on exhibit 23 is taken from a figure and from data contained in that Kaiser study? Yes. It's taken from the publicly available Kaiser study. That's correct. And did you oversee the preparation of this document exhibit 23? Yes, I did. Mr. Barber, I move exhibit 23's admission, noting again for the record that the HCA has agreed to its admission. Yeah, I'll admit it into the record. Thank you. A couple of questions and then we will be done with your direct testimony, Mr. Schultz. Can you just describe what MLR is? Yes, MLR, which stands for medical loss ratio, in its simple form is simply the portion of premium that is consumed by claim costs. If we ignore taxes and fees, then MLR is the inverse of the cost of insurance that I talked about earlier. So 80% MLR would equate to a 20% cost of insurance. MLR, as defined by the ACA, is a little bit more complex than that. The ACA allows issuers to make adjustments for taxes and fees and also to make adjustments for quality improvement initiatives. Generally speaking, the ACA MLR will be somewhat higher than the simple comparison of claim costs to premiums. If an issuer in the individual and small group line of business has an ACA MLR that's below 80%, they have to refund the entirety of that excess cost of insurance back to ratepayers. What does this document show us regarding the industry's cost of insurance over time? So it shows us some interesting patterns and I think it's easiest to think about this in three year segments. So first from 2011 through 2013, which is before the ACA went into effect, we can see that issuers were really consistently producing MLRs in the low 80s. This indicates that they were able to price very accurately based upon the laws and regulations that were in place in their jurisdictions prior to the ACA coming into play. Now when we moved to 2014 through 2016, we see a very significant spike upward in MLR. We know that in the early years of the ACA, issuers lost billions of dollars. We can remember the significant market exits that took place. We can remember the many co-ops that went out of business. So these MLRs that are very high is not what these issuers were targeting. This was a pricing issue. When the ACA changed all the rules, many issuers nationally had a lot of trouble trying to price this business. And we can see that in the next three years, they really corrected for that. So from 2017 through 2019, I would refer to that as a market correction. So nationally, we saw a few years of very, very high premium increases. And we can see that by 2018, I would argue that issuers nationally over corrected for the money that they had lost in the preceding period from 2014 to 2016. That 70% average MLR nationally stands in dramatic contrast to the 93% MLR that Blue Cross experienced at that same time. Finally, in 2019, we can see that national issuers are finally kind of starting to revert to that area in the low 80s that they were targeting pre-ACA. What does the graph suggest about ACA MLR rebates? Sure. So the graph suggests a couple things. First, we know this isn't on the graph, but we know that issuers paid more in ACA MLR rebates in 2019 than they had in any previous year. And what the graph shows is that because those ACA rebates are based on a three-year average, we would expect that issuers are going to pay quite a bit more in 2020 than they even than they paid in 2019, which had been a record. Furthermore, because of the deferred care that's taking place in 2020 and the three-year averaging, it's likely that MLR rebates in 2021 will be even more enormous than MLR rebates in 2020. We can compare that to the experience of Blue Cross. Blue Cross has never had to pay an ACA MLR rebate for these lines of business. We don't expect to need to pay a rebate in 2020, and we don't expect to need to pay a rebate in 2021 because we don't overcharge rate payers. And what does the chart show about Blue Cross's cost of insurance over time? So a couple of things here, too. First, it shows that our MLR and our cost of insurance have been very stable. That indicates to me that we've done a good job pricing in this line of business, kind of in contrast to what we've seen nationally, where other carriers have really struggled to price ACA business. The second thing that it shows me is that we are well above the minimum threshold within the ACA. So that's that at 80%, we have a dotted line on the chart. That's the ACA minimum threshold. We have historically and consistently been well above that. Most issuers are targeting an MLR that's just above that 80% line. Our cost of insurance is less than half of that. Do the conclusions that you're able to draw from this chart relate back to affordability? And if so, please explain. They do. So again, what this chart shows about our cost of insurance is that we have been able to limit that cost of insurance. And again, that's the portion of premium over which we exert some firm control. We've limited that to industry-leading levels in order to provide the most affordable rates possible while still providing access to the high-quality care that Vermonters demand and that Vermont hospitals and doctors provide. Thank you, Mr. Schultz. I have no further questions at this time. Reserve right to ask questions. Honorable, thank you. Thank you. Mr. Angoff, do you have questions for Mr. Schultz? Yes, I do. Good morning, Mr. Schultz. Morning, Mr. Angoff. Am I correct in assuming that you had nothing to do with the decision to make the investment that resulted in a $40 million loss to Blue Cross? You are correct, yes. Okay. Am I correct in assuming that you have nothing to do with developing the investment guidelines Blue Cross follows governing the assets that it will invest in? Also correct. Okay. Do you know what the investment was that Blue Cross made that resulted in the $40 million loss? No, I don't. You've never been involved in any discussion at Blue Cross about what that investment was? No, I have not. Okay. And that $40 million investment is equal to approximately 180 points of RBC. Is that correct? Yes, it is. Okay. Could you explain how the $40 million, does that mean that for each million dollars is equivalent to whatever it is, four plus points of RBC ratio? Is that correct? Objection, not relevant and ask and answer. And I apologize. I was on mute. I would have objected from the beginning of this line of questioning. I apologize. So I need a repeat of the question. I'm sorry, Mr. Chairman. I didn't hear you. I need you to repeat the question, please. Yeah. Is it correct that in order to arrive at the number of RBC points that a loss equals, you've got to multiply the amount of the dollar loss by a certain factor. Objection to the form of the question. And I'd like to add another basis for my objection, which is, in our June 26th letter from Don George, Blue Cross requested that the board and parties, if they had questions about the pension loss, provide those questions in advance in writing. There's nothing about these questions that couldn't have been developed ahead of time. So those are all of my grounds for objecting to this line of questioning. Mr. hearing officer, Mr. hearing officer, nothing could be more relevant to the board's decision. I'm not supposed to propose. And the fact that Blue Cross has lost 180 points in RBC ratio through no fault of the Vermonters through only its own fault. The reason it is so relevant is that, as Mr. Schultz just explained, reason it is so relevant is that the lower the RBC ratio, the more Blue Cross needs to charge, it needs to charge its rate payers. Now, the board's counsel asked Blue Cross some very, very reasonable questions about this investment, about what it was, how it came to be, whether it complies with the law, whether Blue Cross notified the commission, very reasonable questions. And what Blue Cross told the board was to go jump in the lake. They said, we're not answering your questions. I think that it's essential. It's essential for the board and it's essential for the board on behalf of Vermonters to insist on answering those questions, because that money that they threw away is, I'm afraid, going to result in higher rates to Vermonters, unless Mr. Schultz can guarantee right here that it never will do that. So the question that, sorry, I'm getting some echo here. The question, as I understood, it was about how many RBC points does a million-dollar loss equate to. That seems to be relevant. So to the extent I understood the question correctly, Mr. Schultz, could you please answer the question? Yes, happy to. A million-dollar loss equates to about four and a half points of RBC. Thank you. And Mr. Schultz, could you give the board some idea of how much 40 million dollars it's? For example, what percentage of Blue Cross's total surplus before that loss does that 40 million dollars represent? I think Ruth Greene is going to be in a better position to answer that question. And I could try to find the number of our surplus and do a little bit of quick math, but we're probably better served by asking our CFO the answers to those questions. Well, I suppose that's fair. Dr. McIntosh said you answered the questions. Now you're throwing Ms. Greene under the bus. Fine, I'm happy to ask. Subjection, objection. Sustained. Happy to ask Ms. Greene. Can you tell me, you're responsible obviously for the rate filing, correct? Yes, that's right. Can you tell me how this 40 million dollars that Blue Cross lost in this investment compares to the contribution to surplus, or as you guys call it, contribution to reserves, that Blue Cross has filed for and been granted from the board in its history, that is, since the new ACA system started up. Subject to the form, answer if you understand the question. I'm going to need a little bit of clarity on that question, if you don't mind. Sure. What is the total that in dollars, approximately, that Blue Cross has received from the board in, that is, that the board has approved in contributions to reserves or contributions to surplus since the beginning of this system with the board regulating rates? So I'm referring again to page 163 of exhibit one, which I think doesn't quite have all the information I would need to do that calculation, but I can see that the approved contribution to reserve every time has been about 0.3 percent of premium. That is probably in the neighborhood of about six million dollars. Okay. And the system is going for six or seven years? That's six years of experience. Yeah. Okay. So that's six times, I'm sorry, about six times six million dollars. No, I'm sorry. So each year the board might approve a different CTR. Our expectation after the 2019 decision, for example, is that our CTR would be zero. So in 2019, we can compare that 40 million dollars to zero. In 2018, we expected that our actual CTR would be negative. So now we're comparing to a negative number. Okay. Mr. Schultz, can you guarantee that Blue Cross policy holders will never pay directly or indirectly for the 40 million dollars that Blue Cross has lost in this investment? Objection. Hold on. Objection on what grounds? It's asking the witness to do the impossible, essentially. Okay. Guarantee the outcome of future events? Well, you can answer for himself. Mr. Angoth, could you please repeat the question? Yes. Mr. Schultz, can you guarantee that Blue Cross policy holders will never pay directly or indirectly for the 40 million dollars that Blue Cross has lost through the investment that it made this year? Object to the form, you can answer. What I can say is that we're here today to talk about the 2021 rate filing and that not a single penny of that 40 million dollars has been included in the 2021 rate filing. That was not my question, Mr. Schultz. I'll repeat my question. Can you guarantee that Blue Cross policy holders will never pay directly or indirectly for the 40 million dollars that Blue Cross lost in connection with its investment this year? Objection. To the extent Mr. Angoth is asking a question that projects beyond the rates before the board, the question is seeking testimony that's irrelevant. Then I think it couldn't be more relevant. This board regulates the rates, decides whether to approve or disapprove the rates that Blue Cross filed. Correct. The board has jurisdiction over the filed rates before it, which are the 2021 rates, and that question's been asked and answered. It's been asked. It hasn't been answered. What is your response to the objection, Mr. Angoth, that the rates before the board go for 2021 and do not extend beyond, I mean, to the extent that he's answered the question as it relates to the rates for next year? My response is the board has the authority over rates not just this year, but for next year. In addition, my response is that the answer to Mr. Schultz's question, if he does answer it, I think would have an effect on the board's decision as to what to do with respect to the rate increase this year. So, for example, if Mr. Schultz were to say, yes, I can guarantee that no way, one way or the other, will Blue Cross charge its policy holders for the $40 million that Blue Cross lost, that might have a different effect on what the board's decision would be than if Mr. Schultz were to say, I can't guarantee that because 180 points of RBC ratio is a lot. And it turns out that because of this 180 point loss, the RBC ratio falls to a low level, say below 500. Unfortunately, regrettably, we're going to have to raise policy holders rates to pay for it. So, clearly Blue Cross Blue Shield's solvency is an issue before the board in the impact of the rate on solvency. Clearly, the pension loss has an impact on solvency. I think it's relevant over what time period that impact will be felt. I'm going to allow this land questioning, but yeah, so proceed. You can proceed with your question, Mr. Hangoff. Can the report, well, should I add, Mr. Herring, should I ask it again or should I have the reporter read back the question? How would you like to proceed? Could you please restate the question for the witness? Yes. Mr. Schultz, can you commit to the board that Blue Cross policy holders will never pay directly or indirectly for the $40 million that Blue Cross lost this year through its investments? Quite frankly, that decision is above my pay grade. So, no, I personally cannot make that guarantee one way or the other. I will move on. Thank you, Mr. Schultz. Mr. Schultz, to what do you attribute the great success that Vermont and Vermonters have had in containing the coronavirus pandemic? Well, Dr. McIntosh is the expert in this area, so I would refer to her testimony. She's already testified about this. She's asked and answered. I rely on her expertise in these sorts of matters. They really aren't an actuarial matter. What Dr. McIntosh testified to the best of my recollection is that she gave a lot of credit to the governor. She gave some credit to good fortune as well. I appreciate that. Do you have anything to add to what Dr. McIntosh testified to? I have nothing to add. Very good. You remember, when I asked Dr. McIntosh what she assumed in the modeling that you and she and your teams had done as to how much Blue Cross would pay out this year due to the coronavirus, she said she didn't know and I should ask you. So consider that question asked. I'll ask a series of questions. Number one, Dr. McIntosh testified that today the number of cases per day varies between 17 and 2. The range is between 2 and 17. Do you remember that? I do remember that. What did you assume as to the number of new cases that Vermont would experience per day in coming up with your projections that you set forth in the addendum, which I believe is 17? Yes. In that modeling, we assumed that Vermont would see 7 to 8 additional cases per day, which matches the average from June forward. You assumed that Vermont would see 7 to 8 cases a day for the rest of the year? Yes. And then what did you assume as to what would happen in 2021? So we assumed a couple of things. I should clarify my original response. So we did assume that through August Vermont would continue to see 7 to 8 cases per day. From September through December with the potential return of students to schools and to universities, we allowed the modeling to vary from between that 7 to 8 level to something as much as I believe 10 percent higher than that. And then for 2021, we allowed the model to take a random variable, again choose a random variable anywhere between the 7 to 8 cases a day and a maximum of about 15 to 16 cases a day. Okay. I was just going to say, I wouldn't quibble with you about 10 percent, one or the other, but the difference between 7 to 8 and 15 to 16 is pretty significant, isn't it? How did you come up with that 15 to 16? Yeah. Again, that's based on an expectation over time that as we continue to loosen social restrictions, Dr. McIntosh testified about in the fall and winter, especially when everybody is within enclosed spaces, it's likely that the virus is going to spread more rapidly than it has thus far. So we included that full range of where we are today to a level that's about twice that high and allowed the model to randomly select a value within that range. So some of our simulations say that the infection rate in Vermont will never be higher than what it's been in June and July. Other of our simulations take a look at what happens if that infection rate is about twice as high. Based on everything Dr. Kate testified about, it seems pretty unlikely that the infection rate is going to decrease from here. Can you show me where that data which you just described is in your modeling addendum exhibit 17? I can certainly try. So it should be addressed in the treatment cost section and I will direct you to page four of exhibit 17, the bottom of page four. We talked about how we dampened the incidence rate and so we dampened it by about 50%. That's because that seven to eight new case average that we've seen in July and in June is about half of what we saw over a time period that was studied by the Society of Actuaries from March 22nd through May 17th. The Society of Actuaries studied these infection rates by Medical Service Area for the entire nation and what they found for the Burlington Medical Service Area and this also tied very closely to statistics reported by the Vermont Department of Health is that over that time period infection rates were about at twice that level of seven to eight that we've experienced in June and July. So when we talk about the 50% dampening that's another way of saying we're assuming seven to eight new cases a day for July and August. So you mean in earlier in the year in March and April there was a greater incidence of cases in fact twice the incidence of cases that there is currently? That's right in March well late March and very early April in fact the incidence was was many multiples higher than what it is currently and then that dampened by the end of April to a level of about four cases a day and that's what we experienced for much much of the month of May. So when we look at that Society of Actuaries timeframe that includes both the very large spike we saw in March and April and it also includes a very kind of a long portion of the very low incidence we saw in May before some of the social distancing restrictions were loosened. So if I understand you then the the trend in obviously everything's starting from a very low base but the trend in coronavirus cases in Vermont has been down since March but you're projecting a higher incidence later in the year why is that? No I'm sorry let me explain again I think you're misunderstanding what I'm saying. So we're projecting that for July and August it will be about 50% of that time of the level of that time period from March through May that includes some much higher incidence and includes some very low incidence that 50% assumption matches the seven to eight cases per day that we've seen in June and thus far in July. So for July so far it's been a very accurate assumption. Okay if I'm interested and if the board is interested in hard numbers, pure number of cases, number of infections, number of hospitalizations, numbers of deaths, is that in here? Is there any place where we can find something to the effect that we assumed eight cases or 16 cases or we assumed 60 deaths or 90 deaths? Is there anything like that in this in this addendum Exhibit 17? No we did not summarize our modeling in that way. Okay you remember also Dr. McIntosh testified that even though there was just one hospitalization as of June 30th today there are four and they fluctuate between one and four. Do you remember that? I do remember that. What did you assume as to the number of hospitalizations from here on out during the rest of 2020 and then for 2021? So again we didn't summarize our modeling in that way. I'd be happy to follow up with that answer. That answer is going to be very low. We're assuming seven to eight new cases per day across all of Vermont. Blue Cross and Blue Shield insured business accounts for well under 10% of the total Vermont population. So just in terms of new infections we're expecting within our insured lines well less than one person per day. Now hospitalization we took again from we've used some national statistics for that some published data for that and we compared it to Vermont data on Vermont hospitalizations during the peak period to understand how many positive cases tend to result in a hospitalization. So I'm going to avoid doing math on the fly but the hospitalizations per case was obviously well less than 100% way less than 50%. So the number of hospitalizations of Blue Cross insured members that we're assuming is going to be very very low. Okay well then let me ask you this. Can you turn to on exhibit 17 page 22? Sure. Okay I'm there. Okay and you see the first number under 2020 is 339 million you see that? Yes I do. Okay of that projected paid claims of 339 million how much of that is paid coronavirus related claims as of whatever the data is that Blue Cross has those those numbers available. Well zero those are baseline claims in the absence of coronavirus. Okay then where are your where in this addendum is your estimate of coronavirus claims costs in 2020? Sure so you can see that in the direct costs row so we have these as I as I testified earlier we have these various scenarios as to what a second wave might look like. So let's for the sake of simplicity stick to there is no second wave. The direct costs that we're paying for coronavirus treatment are projected at 4.3 million dollars which that is just over 1% of the total claims projection for the year. Okay leaving approximately 335 million dollars in non-coronavirus related claims correct? Again the 339 million dollars is a baseline number so the 4.2 million dollars would increase that 339 up to 342 I'm sorry 344. Okay of that 339 million in projected paid claims how much has Blue Cross paid to date? So the the question as I understand it is what what is the total amount of paid claims that Blue Cross has paid through June and I don't have that number at my fingertips. Okay could you please submit that number to the board and to the healthcare advocate so we can use it in our post hearing memorandum? Yes I can. The reason I asked that if you could delve Mr. Schultz to page two of exhibit 17 and read the first line of paragraph three. On July 7 Blue Cross's actuarial team completed the monthly incurred claims estimates that incorporated claims paid through June 30th 2020. Okay so that's you can understand why I would be asking that question can't you because this statement says we incorporated the claims paid through June 30th 2020 so it is maybe it is our paid claims paid through June 30th 2020 in this addendum at all. Yes well the the amount is not in the addendum so its claims payments to date are in the modeling. Okay that's what I'm asking for I'm asking for the amount of paid claims how much has Blue Cross paid out so far in 2020 I thought from this statement that it would be in the addendum you've just told me it's not correct. That's right. Object to the form of the question. There's a testimony in there from council. Why is it not in the addendum? Because it's not particularly relevant that specific number is not particularly relevant to the modeling. Other numbers like the amount of deferred care are very relevant to the modeling and those numbers are reported within the addendum. You don't think the board should be able to decide whether the amount of paid claims that Blue Cross has made in 2020 is relevant or not. Object to the form of the question you can answer if you can. So Mr. Angolf I would say that I did not include every possible number within this addendum within the limited amount of time I had to put it together I included what I thought was the most relevant information for the users of the addendum. If the HCA or the board would like to see some additional information I would be more than happy to provide it. Thank you. I will accept that offer. Yes we would like to see the paid claims data and I assume that I won't speak for the boards but the HCA would certainly like to see the paid claims data to the extent that it is available for 2020. Could you turn please Mr. Schultz to page three and I just want to ask you a question or two about certain terms. I know of exhibit 17 are you there. I am. The first full paragraph the second line the second sentence talks about completion factors and margin. Could you just explain to me and to the board what a completion factor is and what margins. Sure. So a completion factor is an estimate of given paid claims through a certain date. What will the total incurred claims for a given period be. So and what I mean by best estimates before margin is that for purposes of financial reporting we are required to use estimates that include an element of conservatism. We removed that element of conservatism when performing the incurred claim projections for this modeling. And what if anything is the difference between margin and profit. There's a huge difference between the two. We're a not for profit. There is no profit anywhere in anything the Blue Cross Blue Shield of Vermont does. What margin means in this context is that again we are required for statutory accounting purposes to include some element of conservatism within the projections that we're doing. That's a requirement because statutory accounting requires that we consider moderately adverse conditions when we're putting that accounting together. That's not a decision Blue Cross makes that's that's a required element of that accounting. So when we're using margin in this context it has absolutely nothing to do with profit. It doesn't even have anything to do with policy order reserves or CTR. What it means is it's an explicit margin that we include in our completion factors for purposes of producing financial statements as required by statutory accounting principles. Could you turn please to page to exhibit six page 59. And there are a lot of numbers on that exhibit. And I would like you to go through them with me so that I understand what they are and the board understands what they are. Okay. Are you there. I am. Okay. So across the top you've got five columns. Vermont Capital Region no second wave Boston Suburban Southeast New York. You see that. I do. Okay. What is why do you no second we've no second wave present. I think I understand what that means. No second wave means you're you're assuming there will be no second coronavirus wave. Correct. Yes. Okay. Then with under the other four columns where there are no numbers what what do those what what are the headings for those columns denominator. Sure. So these have to do with our various scenarios as to the severity of a second wave. So as you correctly pointed out we did model what happens if there is never a second wave in the in the left most column we modeled what would happen if Vermont experienced a second wave but it was exactly the same as the first wave that is to say the best experience in the country in terms of preventing infection and preventing hospitalization and death. So in order to provide a variety of scenarios we thought it would be instructive to look at what's happened in other nearby regions and see what the impact of Vermont would be if our experience within a second wave matched something that was more like some of these other areas. So I'm I'm not trying to make any predictions that Vermont is going to suddenly look like suburban southeastern New York. But for purposes of understanding what a scenario like that looks like we did model it and we did summarize those results within this page. Mr. Schultz have you ever sold a house? I have. Okay and when you try to figure out or when the real estate person tries to figure out how much to ask for your house they look at comparables right? They do. Okay could you tell me why you thought why you think apparently that Boston and what you call southeast suburban southeast New York which I assume is a euphemism for metropolitan New York can you tell me why you use those as comparables rather than Maine or New Hampshire or Wyoming or some other sparsely populated state? I'm going to interject to the form of the question you embedded an assumption about what the witness thinks or doesn't think and it contains some argument but if you're able to follow the question you can answer. Thanks Mr. Denafria. So first I'll just say suburban southeastern New York is not a euphemism from New York City. We used white planes as it happens. Infection rates were very similar in most areas in New Jersey as well. I don't think that's what's going to happen in Vermont. To repeat my testimony we modeled a number of different scenarios that range from the very best experience in the entire country to one of the worst experiences in the entire country. We did not model an experience that would be something that was like Italy experienced or some scenario that is something that hasn't been experienced by anybody anywhere. We looked to nearby areas for the purpose of informing us what happens if Vermont's experience in the first wave is not as good. I'm sorry if Vermont's experience in the second wave is not as good as it was in the first wave where we were as many witnesses have stated and some counsel as well we had the best experience in the country in the first wave. If you don't derive value from those Boston or suburban southeastern New York columns then by all means feel free to ignore them. That's why we included the Vermont column. That's why we included the no second wave column. Okay let's go let's go through these numbers. I see the 567 RBC I get what that is that that's the RBC Blue Cross's RBC ratio as of the end of the year last 2019 correct? Yes. Okay and then impact of changes in insured volume of a plus 75 percent. What does that mean? Simply put our ensured membership declined from 2019 to 2020 because of that the denominator of the RBC calculation will also decline which means that for a given level of surplus we actually have a higher RBC not by virtue of having increased that surplus but by virtue of the denominator being lower. Okay so the fewer insured you have all other all else equal the fewer insured you have the lower RBC can be. Correct well I'm sorry the fewer insureds we have the higher RBC will be for a given level of surplus. Okay I'll accept it that way. Just very briefly I know you talked about this a little bit and I don't want to want to prolong this but why is Blue Cross lost so much business? We attribute it to the pricing differential that exists between us and MVP. That's a pricing differential that's existed for quite a long time. That differential won't get any worse based on this year's filing but neither will it get better and we've seen membership losses over time primarily for that reason. Did you ever think that maybe if you asked for a little less of a rate increase you'd have more members and that that would be better for the company overall? Well I testified to this earlier as well. The membership changes do not actually have that much of an impact on the 2021 rates. We can see that because we're not asking for a bigger increase than MVP. We can see that through our analysis as well. I also testified that in as much as rates are underfunded and that's what I take your question to mean. If we were to intentionally ask for premiums that were below actually sound levels what that would do is reduce our surplus and make it less possible for us to invest in new programming like the Civica RX initiative that can actually bend the cost curve and lower cost for Vermonters. What we have to do here in other words is not present some sort of nominally lower rates that are going to deplete our surplus and compromise our ability to implement programming that will in fact bend the cost curve. What we need to do is to have the ability to invest in that programming so that we can bend the cost curve both through participating in Vermont state initiatives and through implementing our own programming. Okay then the next number is projected impact of 2020 operating results. You say that that reduces RBC by 17 percent? Yes that's right. It's important to take that in conjunction with the next number which is a plus 16 percent for investment results. Our as we talked about our historical financial performance our operating results in the absence of investment income have tended to be zero or negative over the last several years we expect that to continue based upon rates that were approved versus rates that were requested and we expect further that the investment income will offset the operating losses. Okay so let me ask you about each of those individually because neither of them seem to make sense to me I may be missing something but when you say projected impact the 2020 operating results is a loss of 17 points. What that means isn't it is that you are losing money on your 2020 business correct? That means that we're not making we're going to make less we expect to make less than the one and a half percent CTR that is required to maintain a constant level of RBC. Okay and so is that negative 17 net of how much you all save because of minimal coronavirus costs or is that just based let's strike that let me ask it again can you agree don't you that Blue Cross will be paying out in 2020 less than Blue Cross projected in 2019 it would be paying out in 2020? Yes I do. Okay if that's the case if you're paying out less than you for 2020 than you projected in 2019 it would be paying out in 2020 how can the impact to operating results be negative rather than positive? Because this is the impact for the baseline scenario before we consider COVID impacts the COVID impact you're talking about can be found in that okay we don't have these rows labeled but it's it's farther down the page just below the second subtotal. I get you thank you for that description. Then conversely when you say that the projected impact of 2020 results is a plus 16 percent not to harp on this but how can it possibly be a plus 16 percent when you guys lost 40 million bucks? So two reasons for that one is this this is not the pension investment results that flows through an entirely different accounting mechanism that I'm sure Ms. Green will be more than happy to elaborate upon this has to do with the investments we make relative to the premium dollars that we we take in relative to the cash flow of that those premiums ends those the claim payments out so this is not pension investments but other investments that we make as we maintain a certain level of of assets. The pension money okay so you include the pension money is on this it just comes we'll find out about it later on down in the in this exhibit yes okay um then uh investment in Vermont blue advantage that's a negative 20 percent you see that yes I do okay and what's blue advantage? Vermont blue advantage is a is a brand new company that's going to begin offering Medicare Advantage plans in Vermont in 2020 okay I'm sorry in 2021 I'm going to start and Medicare Advantage plans are not for people in the individual and small group market correct correct okay and so why should people in the individual and small group market be paying for blue cross to make an investment in a company that is not in the individual and small group market? That's an interesting question we you know blue cross is looks to provide quality products to all Vermonters um there's been a lot of market demand for us to get into this space and it's important for us as a going to concern to be able to invest in the types of new products that expand access to quality care for all Vermonters okay and then the negative six percent on the next line that's in a what what is that for what's the new company that that goes to that's that's for Civica Rx which Dr. McIntosh testified to um Civica Rx is a is an innovative solution that's going to bring lower cost generics to the state and make them available to our policy holders so that that's an investment again it's a really good example of an upfront investment that we need to be able to make in order to bring greater affordability a few years down the road in this case starting in 2022 okay and that's something that would benefit individual and small group policy holders correct yes it will um so you know that you know out all those and you got a baseline uh RBC as of December 31st 2019 of 657 right uh yes that's right okay then there are more adjustments right the equity market losses of a negative of a negative 14 percent again that doesn't include the 40 million bucks what is that uh so again that relates to those investment results that we talked about earlier that's our that's our typical cash flow separate from the pension funding okay uh and it is uh it is a 14 percent loss uh equity market loss typical for blue cross uh you'll have to ask Ruth Green that she's our treasurer she'll know that answer very good um then there's a plus 42 percent for the acceleration of the AMT credits and I believe I understand that the AMT credits were supposed to be spread out between 2019 and 2022 but you guys are getting it all in 2020 correct that's my understanding then is that is that about 40 million bucks total oh i'm sorry that's that question does the total to the total AMT credits uh amount to about 40 million dollars uh that sounds about right to me yes okay I see the two percent risk adjustment true up I won't harp on that the 46 percent that is for the uh the risk harder litigation based on the supreme court's decision a few months ago correct yes okay uh all right and then and then you have this negative one 180 based on the 40 million dollars which I've said enough about but um that that's what that's what produces the 553 right um yes that's right it's part of the calculation sorry the difference between the 657 and the 553 is because of the various adjustments between the 657 and the 553 correct right okay and then so if you if you disregarded the 180 180 percent uh hit to rvc because of the 40 million dollar investment loss then what would Blue Cross's rvc ratio be I'm going to object just to a to a word choice um Mr. Angov said investment loss and I just want to be clear I believe he's asking about the pension loss just to keep the record clear yes I stand correctly that's what I mean if you if you disregard the 40 million dollars in pension in the uh if you disregard the 40 million dollar investment with respect to the pension plan uh and thus disregard the 180 drop in rvc what would Blue Cross's rvc ratio be uh in 2020 before COVID impacts on operations uh doing a little quick math it looks like 733 percent okay and then with the um the numbers right below the 553 number you've got there are different numbers obviously for the different uh the different scenarios that you assumed um so that so that means if we just look at that those five numbers um those five numbers are the estimate of the impact to rvc based on COVID related claims and deferred care in 2020 correct specific to 2020 yes that's right okay so there's a positive 60 percent impact for no second wave is that right yes okay but only a positive 33 percent impact for suburban southeast new york yes and a 98 percent positive impact for Vermont yes okay um all right uh and thank you for your patience I know this isn't riveting but I want to make sure I understand all this um the next set of adjustments are all COVID related adjustments is that correct the the the the adjustments before you get to the estimated rvc as of December 31st 2020 yes okay and how did you what what methodology did you follow in determining those those impacts so it kind of varies by item um in terms of uncollectible premiums I can give you a very brief overview but um uh miss green is the person responsible for this estimate uh so we know that we have extended grace periods quite significantly uh during the emergency um we expect that a lot of those premiums will in fact never be paid um and so we we have a 21 point impact to rvc that's estimated here uh that canceled the next item is a six point impact due to the canceled recruitment of blueprint over payments um that one kind of is what it says it is uh we were uh going to recoup those over payments from providers but in light of the the crisis that's ongoing we decided to forgive um that recruitment um if I can just try to shortcut this a little bit on these these are estimates or projections right there's no formula that you use to determine these numbers there's no formula these are these are all our best estimates of what the impact uh is or is going to be based on actuarial judgment uh in in many cases based on actuarial judgment in some cases based on the blueprint number for example is reality that's an actual number uh the pharmacy number uh as another example is a projection based upon the six months of pharmacy experience that we have to date so we we have some pretty good line of sight into how that pharmacy experience is emerging so I would consider that and a number of these other items pretty solid projections okay um can you just go down to the last line before the footnote under key assumptions you see there are two key assumptions yes okay um and the second one is no significant no significant loss of membership due to economic downturn do you think that's a reasonable assumption I do we've we've seen some small membership losses uh to date but we have not seen uh what I would term a significant loss of membership at this point okay and my final question for this exhibit is you see just the you see in the line right above key assumptions it says RBC as of May 31st 2020 and then 695 you see that I do okay does that 695 include the 180 drop because of the 40 million loss or excluding uh again I'll defer that question to to miss green who will be able to and I'm sure has the answer to that I don't want to say the wrong thing so it will wait for her to give us the right answer very good um you you're familiar with uh Oliver Wyman's conclusion that your projections here are somewhat conservative right I am okay and you know that they say that based on their analysis that the net effect of the the impact of the coronavirus should be between 21 and 105 points positive that is RBC should increase by somewhere between 21 and 105 points correct I have seen that yes okay and you disagree with that completely I believe mr Schultz and mr chair and members of the board you'll be pleased to hear that's all I have thank you mr Schultz thank you mr Angle all right so we're gonna move on to board questions um start with number lunge thank you okay uh hold on just one second hi paul I hope you're doing well hi robin I am thank you you too start with asking you about the Oliver Wyman um estimate that we were just talking about so you had testified earlier that the second version of the modeling in exhibit 17 takes uh out the conservatism am I remembering that correctly it takes out any element of conservatism that we could find um yes okay so didn't Oliver Wyman indicate that part of the conservatism was related to the deferred care assumptions they did and um your testimony today is that the 56 percent chart that's an exhibit six is the correct chart is that right so that chart is correct in terms of the returning care by line of service the 51.7 percent that's included on the chart in I believe it's exhibit 17 that 51.7 percent is the new overall assumption okay so you you the modification you made was to drop that from 56 to 51 percent it is um it's really a function of math rather than a modification um you know as as we included the June data each of those 33 service categories had a different result in terms of the amount of deferred care so when we did the when we did the math on the new data we come up with 51.7 percent rather than 56.1 percent okay thank you I think you've heard my questions to Kate about the cost containment programs is are you the right person to ask about that or should I direct those to Andrew I I hope I can answer some of them so let's let's give it a shot okay great so um in the actuarial mem memorandum which is exhibit one page 37 there is a discussion about cost containment programs that were delayed due to covid which included programs that would reduce inpatient readmissions and reduce db admissions um what I was hoping to understand was a little bit more in terms of the rationale for not resuming those programs at some point in 2020 that's it's a good question I'm not in charge of those programs so I'm not making those decisions so hopefully Mr Garland may be able to give us some some insight there great thank you um I'm going to ask him about the home infusion program too unless you can tell me the difference between uh the program that was discontinued and how that's substantively different than a reduction in prior Roth yeah so the my understanding of the program that was discontinued is that this was um some uh kind of positive outreach to try to encourage members to use more ho infusion rather than traveling to the hospital um so it's really that outreach that's been suspended to try to move those the site of that care from hospital to home the prior authorization program is is something that's completely separate from that right but wouldn't you expect the same result that if there's no prior authorization more people would get it um keep question potentially I I've not studied that data myself so I uh I you know I'd want to do so before uh saying something conclusive about that okay thank you um sorry I'm taking notes which which requires me to flip back and forth in my notebook so no problem moment um and do you have any utilization statistics on the change in uh home infusion over the course of COVID I don't know okay is that something that you can get us or do you think Andrew would have that um I doubt Andrew has that at his fingertips as well uh so that's that's something that I can follow up with thank you okay um so you uh testified about um that care was already returning to the hospital can you give us more specifics about what kind of utilization you're seeing um so overall we're seeing uh our estimate of June utilization is about 5 percent above what we would expect based on historical norms um and that I don't have all the numbers uh at my fingertips by service category but we've we definitely see some serve some surgery service categories running at way over 100 percent there are some surgical categories that have not returned yet to 100 uh to my recollection things like heart surgeries and lung surgeries are still pretty low I'm I'm not a practitioner but I'm I'm guessing that's because the hospitals may still be grappling with how to safely do those surgeries in a COVID environment but for a number of other set service categories specifically related to surgeries we're way above 100 percent um mental health is also pretty escalated I don't think any of us will be surprised by that given everything that's going on um and I while I've looked at kind of that full distribution by all 33 categories those are kind of the ones that I'm remembering off the top of my head um so you also talked about how the change in membership did not create a change in the 2021 rate is that your testimony for the 2020 rates for the 2020 rates we did in fact uh have a submit a higher increase than mvp so using the same comparison uh you might be tempted to conclude that that that the membership losses were driving the increase um I my conclusion is a little different from that I know that mvp in 2020 I'm not here to talk about mvp's filings I'm not the expert in them but I can say that mvp in 2020 submitted a utilization trend of zero I know that was ordered to be increased as part of the process last year uh so my professional actuarial opinion is that mvp included a utilization trend in last year's filing that was much too low um I personally would not use a one percent utilization trend for this year either uh which is what they filed for this year's filing um so if if I were mvp's actuary which I'm not I I don't think a one percent uh trend is is reasonable so I think their rate may be too low this year as well so uh but the membership has impacted the morbidity of your population has it not it has impacted the morbidity yes that's true and we have adjusted for that in in doing our utilization trend projections this year or in only in prior years I'm sorry in this year or only in prior years uh in this year and in prior years we have consistently adjusted for morbidity changes in the population uh when developing our utilization trend um in exhibit one page 163 which is the PPR chart yes they're myself here um where it says approved contribution to reserve these numbers don't reflect what the board approved isn't that right that is correct these numbers you have adjusted based on uh other changes that the board made in its order assuming that those would fall to the CTR do I understand that right yes you did um in terms of the investments in blue advantage which which other markets are contributing to the blue advantage program that that's a hard question to answer I mean all of um the entirety of our book of business contributes toward our surplus and therefore toward our overall RBC so yes that includes self-insured plans so it's it's not it's not as if we're you know we're not doing something as direct as saying okay we need to increase this rate by five percent for or half a point or whatever to pay for blue advantage right it's our surpluses are aggregated um the the result of our aggregated operations over the entirety of the time that Blue Cross has been in business so when we decide to spend that surplus whether that's on a new making a new product available um so that we can improve access and quality for a segment of Vermonters that we weren't able to serve before or if that's for new programming it's going to make uh the cost of care more affordable for all Vermonters that comes from that entire amalgamation of 40 plus years of business that we've done so yes it's it's all in there if you want to think about who has contributed toward that it's self-funded lines it's these insured lines we're talking about today it's large group insured it's our Medicare supplement business it's our investment performance over time it's kind of all of those things intermingled okay thank you um in the administrative cost or cost to insurance estimates uh did you include any assumptions related to the federal requirement to provide a separate bill for abortion services um we did not do anything explicit there now okay so there's no increase in your administrative cost relating to that requirement that's correct there is no increase yep that's good because it's not happening so we wouldn't want to charge for it um okay so I have some questions related to unit costs and items that are in the confidential portions of the exhibit it might it makes sense Mike to fold those until all everybody else is gone because I might not be the only one that yes that makes sense thank you I meant our mic oh sorry that's okay which exhibit Robin uh well I have um on page exhibit 131 there is a sentence that is confidential related to e-schedules yeah I think Mike Mike do you anticipate an executive session for Andrew Garland's testimony I believe so if if Bridget can chime in Bridget has been working most directly with Andrew you'd get a better answer from from Bridget on that yes we do anticipate an executive session for Mr Garland okay why don't we do it all yeah that makes sense because my questions may be for Andrew I'm not sure so that would that would be more efficient I believe um okay then I'm good thank you thank you Robin okay Maureen hi Paul hi Maureen a couple questions um in the opening arguments and something that you've also touched upon which is that your rate submitted and then lower than the competitors this year so 6.3 versus 7.3 and one of the things I guess I want to look at how do we think about the risk transfer adjustment because prior to the risk transfer adjustment the blue cross rate increase would be 7.7 percent and the MVP rate increase would be 6.1 so basically you have a higher rate request I think on the underlying rate than does MVP but because there's assumption that based on the risk transfer I guess you'll have unhealthier people and you'll pay more which is included in your rates you get money back um am I thinking about that wrong I just want to make sure you know because I it was kind of a new approach for you guys to be I think looking at the competitor and what they're charging and I tend to look at it prior to risk transfer um as what the underlying rates are and then the risk transfer is a separate adjustment and just wanted to get your point of view on that yeah I think that's an appropriate way to view it but that while the risk transfer is a separate adjustment it's very closely related to kind of that underlying amount that you talked about as well in other words the reason that our increase without risk adjustment is higher than MVPs is because we have we have all the folks who have the higher healthcare needs so really the risk adjustment program is working exactly as intended in as much as you know one carrier has much more of the unhealthy your risk and the other carrier has most of the healthy risk the risk adjustment transfer is supposed to net that out so I you know I I look at things myself as well before then the risk adjustment transfer and I often see that we're having losses because claims are higher than I projected but then the risk adjustment transfer comes in higher than expected as well and kind of washes that out that's that's the way those two things are supposed to work and it appears to be working that way in Vermont just to that how then should that relate to premiums charge so if if in fact a risk transfer is kind of helping to set the market straight right wouldn't wouldn't in theory and in perfect world wouldn't then you know the risk transfer make the rates comparable on similar plans so gold to gold bronze to bronze etc you know knowing there's a different mix of people and I'm not trying to say you know to me I thought that's part of what it's supposed to do and so why doesn't that happen yeah that's that's a really good question and I've been spending a lot of time over the past couple years trying to answer that question for Blue Cross so what what we're seeing is that the morbidity differences between Blue Cross and MVP net of risk transfer are not really changing over time because that that net increase that we're asking for is is very similar to what MVP is asking for and as I responded to Robin Lunge I think there are some other reasons why MVP's rate requests have been a little bit lower than ours in past years specific to the utilization trend assumption so when I think about risk adjustment I while the situation isn't really worsening I do think there's an opportunity there and that if we were able to optimize risk coding in other words if if doctors in Vermont were coding for every condition that a member has but no conditions that a member doesn't have so if risk coding were perfect I do believe there's a there's a pretty significant opportunity to increase that risk adjustment by as much as 10 million dollars in terms of the transfer and if we were able to to make that happen that would bring our rates very much more in line with MVP's so I am working with some of my teammates and others within the organization on just that to try to make that happen because we believe that risk adjustment has not been really operating at 100 maximum efficiency and that there's some opportunity there okay because I mean it would be obviously good if our Vermont based insurer could be you know competitive with the you know other insurers to to keep that viable when when you talk about admin costs and and you actually quoted you know something that was in the reports you know 90 percent lower than you know in the L&E report again you know kind of all well and good but when we look at in the state right and amongst the two filings that we have you know Blue Cross is is over 12 higher on a pm pm basis than what MVP is for an admin right and you know again so we're kind of comparing you know within our market right and there's different dynamics that go on there and I know they're coming out of New York etc but you know how should we look at that because it's pretty significant to have you know such a high increase on a pm pm base high comparable on a pm pm basis so I first I'd say probably percent on a precedent premium basis is the more apt comparison to make a lot of administrative expenses are variable and they are variable with respect to the number of claims if if members are not using an awful lot of care they're not calling the call center as much we're not processing as many claims etc etc so there's there's a whole line of sort of variable expenses that do fluctuate based upon the amount of care that's consumed so for that reason I I personally would steer clear of pm pm comparisons and look at it more in in relative to percent of premium beyond that I'm I'm not sure that I can give you any like key insights into into MVP's administrative structure or how or why it might be any different from Blue Cross's administrative structure okay I'm gonna look at two charts one the exhibit one page 163 that we've talked a lot about which had the 12.6 million actual operating losses in the past six years and I think you were adjusting it slightly for what you now know maybe a little bit different and so I think you were increasing it by maybe you know 2.8 million so was that about right so you're gonna be about 15 million and and if I look at actually the last three years including that additional change it's it's been a net change of about I think a negative three million dollars yeah I think that might be a little bit much again I'm doing math on the fly which I'm I'm not supposed to be doing but I think the risk adjustment transfer true up was a little bit less than a million dollars if I'm recalling correctly okay so that that 12.6 probably becomes something in the in the range of 13.5 13.6 somewhere around there um but yeah apart from that clarification I think your understanding of of what we show in the chart is accurate okay and then if we go to the exhibit six page 59 you know looking at at the RBC and what's gone on there um would it be fair to say I guess I'll ask the question you know on average um you know year over year on average knowing there's ups and downs but do you project investment gains do you expect investment gains on average okay um and the reason I point that out is because as we look at the number that you had for the for the last six years and and even if we make it the last three years but for the last six years I think it had a total of about a 70 point impact on RBC is that correct in terms of the operating losses or yeah so 12 million dollars in operating losses has had about a about a 60 percent 60 points and we would expect that we would have investment gains so I just point that out because we hear a lot about what the Green Mountain Care Board has done to the rates and you know here we have a six-year trend we have a 12 million dollar loss maybe it's a 13 million dollar loss um over six years and we did expect as a company would expect there would be investment gains that would offset that so overall I don't think that's that's too bad I mean I know there's puts and takes but well I do want to point out um I think it's important to recognize that the one and a half percent CTR that we file assumes that we will have investment gains so if we did not have investment gains our required long-term CTR would not be one and a half percent but something quite a bit higher than that I can't sit here and do the math right now but for sake of argument or sake of illustration I'll just say that might be three percent but because of investment gains we're able to bring that back down to one and a half percent so I do think what we were showing in the earlier exhibit is a fair comparison because it shows what's happened from operations we do expect some investment gains but those investment gains are what allow us to file a CTR that's as low as one and a half percent instead of filing something much higher than that and I know last year we talked a lot about the you know amt tax and what was going to happen or whether it was admitted or not admitted and all this went back and forth but you know at this point when we look as of May we're reporting 695 for an RBC when you look to the end of the year prior to the pension change it would be 733 and prior to any other COVID adjustments which would put us near the top range of the 590 to 745 and you know I'm not going to belabor the point at this point but that you know the 180 basic point hit that's going to be expected for the pension and from what I've been reading it doesn't occur till 1231 so it's not in the May numbers you know that 180 first contrasted to what we just said was a six year loss or six year change for for this plan with the 60 basis points or 70 basis points so just to kind of show the magnitude of what this 180 is going to potentially do to the to the RBC is huge and I think the you know prior questioning you know is very relevant whether we say it impacts or not it impacts it's it's when this hits at the end of the year if it's still 180 it will be 180 basis points reduction which will bring us now to the lower end of the range versus being it quite healthy in the upper end of the range so you know I'm sure there'll be some other questioning on this I you know I know it wasn't what was expected to happen with this pension and and there's going to be lawsuits and everything else going from this but you know it's a significant burden and it's three times the size of six years of impact for what what has been for the you know for this book of business so I don't know the answer to it I don't know what we do but it certainly you know it certainly plays in to what's happening and I'm sure it was a big surprise to everybody and I'll just leave it at that for now but but I do think it's pretty critical as we talk about the and I believe this is non-confidential but you know the hospital rates and what's what has been approved and then what rolled through this filing specifically to exhibit 21 which was rates that have been submitted potentially bought by EVM I just want to get an understanding on what's included in the rates right now have we included just the prior hospital rate increases or have we overlaid I believe we have overlaid I believe you've overlaid this increase in there and can you talk to that we have not included this increase this is something that you know the the letter that's included in the exhibit came to our attention well after the filing date so but what we included in the filing was simply an assumption that the commercial rate increases that were approved in 2020 were approved in 2019 sorry for actuaries to keep our years straight sometimes sorry about that that the commercial rate increases approved in 2019 would match the commercial rate increases that you're about to approve in 2020 okay and we talk a lot about the rate increases and comparing so when we're going to get new numbers in and the rates you know inevitably won't be the exact same and we you know look to you know you always look to adjust that and put that into your plans how do you look at utilization and what the hospitals put in their budgets for utilization which I think is equally as important for all their utilization assumptions and I just want to get a handle on you know how do you guys look at at that as well or do can you I mean not as their utilization is off all all types and you know like but still there are major assumptions that you have and major stuff that they have yes so I do think hospitals utilization assumptions are extremely important in terms of assessing their commercial rate uh asks um that you know especially given that we've already seen a huge deferral of care and we expect a lot of that care to return I don't think it would be appropriate to include a zero percent utilization in a hospital budget beyond that um and you kind of started touching on it uh marine are I believe that our utilization trend is the most accurate utilization trend specific to our business hospitals have to consider Medicaid they have to consider Medicare they have a whole host of patients that are well beyond just in our insured patients they have to consider you know state employees Vermont teachers that are that are part of self-funded programs um so you know it is it is not exactly an apples to apples comparison so I do think it's an important assumption and I'm glad that the board is will be looking at that for hospital budgets as well but I also think that our assumption is is the best assumption that we can use specific to the blue cross uh utilization for blue cross members in these lines of business okay and um one last question on cost savings and cost containment um you know there there have been things in prior filings there are things in this filings and there will be things obviously in future filings and just really want to push on how much can we get from the cost savings and cost containment I know I believe it was last year I think in some of the testimony you know when we have put in one percent for affordability it was like well we we you know if you told me in advance that I needed that I could get it but you can't tell me in the current year something like that was stated right so so how do we get um you know maybe there's already some in for 21 there is but how do we get that bigger in the future filings you know how can we say now I want that to be two or three percent you know next year I mean what are we working on what can we get and how you know how can we push that harder yeah I think having that guidance early from the Green Mountain Care Board as to what your expectation is um will will help us uh as we strive to implement this that some of that programming um it it's not always an easy thing to implement some of those savings programs because we are often making trade-offs while we're enhancing affordability we might do that um by restricting in some way access to care whether that's directing you know if we think about some of the uh cost differentials and so forth that exists within the hospitals one thing we could do potentially is direct members who need a colonoscopy for example to one facility over another um that could generate some savings some of some enhanced affordability but at the cost of access you can no longer drive this down the street and go to your local hospital to have this service you might have to drive 45 minutes down the road an hour down the road something like that um other programming that we're implementing has an impact on providers and we often get an awful lot of pushback um from providers when it comes to implementing that kind of programming um so yeah there there are some things we can do uh in this year's rates we've included as i testified about five million dollars worth of savings through blue cross uh programs that five million dollars is is going to be uh something like maybe 1.7 percent or so uh of total premium so that's that's a pretty good number we've already included that and if you tell us now that we expect you to include uh some number one percent has been your affordability cut in the past two percent whatever that number may be um i think that would be helpful for us as we try to take strides to actually achieve those savings and incorporate them into the premiums what we can't do is as you as you alluded to we can't react immediately so if you tell us now we need you to achieve an extra one percent in savings through this programming by next year there's just not enough time to develop and implement a program by the start of 2021 to achieve that savings in 2021 if you told us right now we expect you to achieve an additional point of savings in 2022 then that gives us enough runway to actually figure out how to do it if you will and you could exceed your savings that you have this year i think you had exceeded in some of the commentary you exceeded how much you thought you would get so i guess are you are you conservative in what you roll in there for these estimates it's a good question we we try not to be uh sometimes it's it's difficult to to um project exactly how much savings we're going to see uh some of the programming that we had in in the last few filings um isn't going to isn't going to lead to the type of savings we had estimated um for large part because we've had to suspend a lot of those activities due to the pandemic so sometimes things come to fruition sometimes they exceed what we thought they were the lab benefit manager is a good uh is a good example of one that's actually worth more than what we thought so while we had something in our rates last year for it we actually achieved something greater and that delta flows into this year's rates so that you know the savings that we're including as part of that five million dollars in this year's rates are on top of the savings that we already assumed that we were going to achieve in last year's rates it's all cumulative as we go along that's all for my questions i'm sure i have some others but i'm sure the other board members will address those as well so thank you thank you okay next we'll go to board member pelham hi paul how are you morning tom and quite well how are you you holding up okay i am holding up okay yes thank you so i i want to start with just a little bit of housekeeping um just to be sure i want to go back to uh exhibit 23 okay and that was the uh kaiser chart yes and just um so at the top of your version of it um you where you've added blue cross blue shields profile it says individuals slash merged market medical loss ratios and then when you click on the link it says average individual mark market medical loss ratios so i'm just wondering is this an apples to apples comparison uh did you put in insert the merged market to make it clear that in vermont it's a merged market but are these numbers nationally just for the individual market they are just for the individual market and i i do think that's the best basis of comparison relative to our merged market uh when cms issues various reporting about how the markets are performing whether that's related to mlr rebates or anything else um the vermont merged market is included with all the individual market reporting so i i do you know it's as as you point out it's not a precise comparison um but i think it's the best comparison that we can make right i mean especially it's hard to find national data so i mean uh just found just found that chart and sent it around to us uh you know months ago you know and i kind of um have had it to the back of my mind um hang on a minute did i lose you i'm still here okay so um i just want to start again by um just you know for me kind of finding a path between kind of the look back trending actuarial approach and the kind of the look forward um uh all pair model uh approach because there there is attention there and um you know i've kind of aligned myself just in terms of my my board work with the three and a half percent target because i know where that comes from that comes from you know jeff car and tom kevets analysis of the gross state product from uh 2001 to 2016 and that's where that three and a half percent came from so it's it's grounded um in the vermont economy obviously things change the economy's you know taken a bit of a wear and tear in the last few months but it's it's a number and so the first year in in the um that we have the apm total cost of care for 2018 we're at 4.1 percent so we're still within those guard rails around the three and a half percent but i worry that 19 20 21 especially reading letters like Todd Keating's you know that um you know we are um you know we we are not going to get where we want to go so um so um but i i do want to say that um in terms of the wyman data you know the that those numbers tie out um uh precisely in terms of um the net gains to what's in your audit financial statements and what's in the um uh um supplemental health care exhibit so i feel comfortable in that and they they they do say and i um that they do if you kind of add them up um um over from the 2015 to 2019 period pick whatever venue you want you end up with a a total gain of uh 16.8 million dollars over those five years um with uh um with losses that's seen that i'm a current net income accruing in three years and losses in two years so i raised that just because i run into people and say hey that's these insurance companies they've got all the money just whack you know and it's just popular out on the street there you know and i kind of want to agree with them in some ways just you know emotionally but that's it's not there um i don't think um but i do think that you can find savings no budget is perfect marine says that all the time it's uh it's uh um it it changes from the minute it's been approved and you know i found that in my experiences always two or three percent you can find if you push a little bit and there's some screaming but um uh it's it's there so um so i want to go to um the uh um the quote and i think it's not in exit i'm not going to go switch my binder i i think i just hope my notes are good here it's in an exhibit of one page 31 where you say observations of recent contracting and provider budgetary changes are the main source of unit cost trend and further you say 53 percent of the total medical claims occurred in remodeled facilities and providers impacted by the hospital budget review process of the green mountain care board and you know i i can look at data that we have um in terms of hospital budgets and stuff and kind of get and even commercial insurance you know uh you know what what that is in terms of revenues to hospitals but i'm just wondering if you and if you're not the right person that's fine if you can you dig a little deeper on that um uh on on that 53 percent and kind of uh how the entities that comprise that 50 percent how their input to it is weighted relative to one another i mean is um is there a waiting system that goes on when you're kind of looking at the trends of those entities yes so it's and then the the weights that we use are the the claims that our members incur at those entities um so as you might imagine university of vermont health network is the is the strong majority uh you know by far the biggest entity um within there i don't i don't know that they're a majority of the 53 percent but i could get that data and then share that with you and your fellow board members so that i can tell you in terms of uh npr and in terms of overall commercial revenue um they are more than a majority we have those numbers here the uh you know the number um for 2019 was total commercial revenue hospitals was 1.395 billion dollars and the network was 54 percent of it um so you know it's it's it's but it's just something to to ponder um so my next question is that that the trends that you look back on are trends that blue cross blue shield has had a hand in negotiating i mean earlier you said you know that we look back into our database and you obviously have a database about claims um and that's part of your trend but it's it's not that it's entirely the the trends that you look at are not entirely kind of a free market independent uh process so you you you are part of the process of negotiating those trends um that that's a yes or no answer i guess uh yes i think uh andrew garland will testify at length about that process okay well i'll just ask the question now but i'll ask it to him later is is just um you know the there's another quote and i'll i'll say from last year where they basically say that you know that with some providers you kind of run up against a brick wall and it's either give them what the green mountain care board approved or they won't they might withdraw from your network that was the testimony you know uh last year and so i'm just wondering um you know it you know about that process um uh and trying to kind of get more to the all all-pair model result um is that and i'll ask ask andrew this but it seems to me that kind of the message is green mountain care board you do the heavy lifting here you set the constraint uh and and uh you know constraint so um anything over that constraint uh is uh uh it's going to be a kind of a a negotiating item between the insurer and the provider if i'm a board member palom i apologize i just want to remind mr schultz that the question veers towards um confidential areas of testimony about provider negotiations and i would just caution mr schultz since we're in open session not to reveal any such information and there there will likely be a executive session yeah where we can go into that more depth later thank you i appreciate that that's why reference data that you know comes out of our system you know in terms of the uh you know commercial payments in 2019 um so um and this might not be a question for you but it in the 2019 supplemental health care exhibit it indicates a 1.63 million dollar expenditure for cost containment what do you know what that is what that goes to directly i i do not uh miss green will most likely be able to answer that question for us okay provider negotiations essential benefits we covered cost shift thank you i was going to ask that question and your attorney beat me to it but i wasn't going to ask i wasn't i wasn't going to ask the question that you did answer on um the difference between the qhp operating loss and the supplemental health care underwriting i wasn't going to ask that one but i got the answer anyhow administrative charges um provider network uh just one question on the loss ratio um i mean you can go back through history and look at loss ratios i think for some of your portfolio near the beginning um that's not a sticky here somewhere but you were you were down in the you know for for it might have been individual claims there might have been a small group in like the high 80s um going back four or five years and i'm just wondering if if there were a um a more um aggressive approach toward provider budget increases um and and therefore claims costs could be driven down a little bit you know that could fall to the benefit of rate payers it's it's uh because you know and saying kind of at the same ratio that that could fall to the benefit rate payers yes i i agree in as much as uh hospital um reimbursements are lower that definitely benefits rate payers and the same is true you you learn alluded a little bit earlier to you know if we're able to trim budgets by two or three percent um with respect to the premium rate we need to understand that two three percent is means we're paying providers two to three percent less right that's you know blue crosses admin portion of the premium is very small so we can't find two to three percent a total premium there we're talking about paying providers less that's right i mean that's why i raised the the wyman data because i i think there might be something there and admin things of that sort but it's not where you're going to find the money to really substantially impact uh um premium rates say it's it's it's in the as the money comes out of rate payers pockets goes through you guys and out to the real world you know that that's where this option is and so i i just was trying in my simplistic way to get a sense of what we're talking about here and so this is my simple math and you can correct me if i'm wrong is that if you look at uh what was filed for 2021 it was a 311 million dollar increase or a 311 million dollar premium amount um which is uh 18.5 million above the 292 million dollar number uh projected in those uh um um small group an individual for um for you for this year so it's an 18 million dollar delta um and if you divide that by the original 6.34 percent increase that's 2.93 2 2 million uh 2.93 million dollars per point and so you're now at 5.5 percent um if uh if the target my target were 3.5 percent you could say to me go find it mr palam um but that would but that would be uh 2 uh million i mean two times the 2.93 million or 5.8 million dollars so that's what that to get down to a 3.5 percent level we're talking about 5.8 million dollars in the system um that that might be impacted on uh providers out there in the world you know mostly the hospitals is that a rational logic so it is um a couple of good stuff there that uh there are a couple key differences between the all-payer model and what we're putting in our rates uh most notably is that the all-payer model target uh doesn't include pharmacy so our our rates you know as i testified 3.7 percent of that increase is due to specialty pharmacy yeah so if if we you know now some of specialty pharmacy granted is takes place with as part of the medical benefit so that would be part of the 3.5 percent target um it especially is about 50 50 in terms of retail pharmacy uh versus medical benefit so if we take out half of that 3.7 we're talking about a little under 2 percent that's specifically due to specialty pharmacy retail pharmacy is also escalating well retail pharmacy is mostly escalating because of specialty pharmacy so i'll just leave it at that um kind of the other key difference is that that three and a half percent includes all payers at as the title suggests right so it's medicare it's medicaid and it's commercial payers and i've we seen as we've seen year after year after year in the hospital budget submissions there is inevitably a cost shift from medicare and medicaid to commercial players so i even if we as a state achieve to the three and a half percent um i i would be astonished and in a really good way if that three and a half percent came from three and a half percent from medicaid three and a half percent medicare and three and a half percent commercial uh what's been the experience in vermont and what i would expect to happen is something that's more like a very low number zero to something very small for medicaid again a very low number for medicare and then the commercial increase becomes the balancing item so we might be at zero one and six by way of example just using some really rough rough illustrative estimates um so i you know i i'm not sure that there's a scenario where we actually get the because of the because we include prescription drugs and because of the you know the the prevalence and cost escalation of the specialty pharmaceuticals but also because of the cost shift it's hard to foresee a situation where a commercial rate increase would be as low as three and a half because the medicare and medicaid increases are unlikely to be as high as three and a half yeah well i mean those are those are very good points and when it comes to the pharmacy specialty and i have no no good ideas i mean it just seems a world out beyond our borders you know that that that can't be um you know adjusted or manipulated but i think in terms of and i agree with you on the all-payer model the three and a half percent to some extent but keep in mind that increases in medicaid don't count during this period don't count to the total cost of care because the the agreement exempts them basically so the what drives the three and a half percent is the uh is the commercial um and and the medicare so um you know and so when i when i kind of um i had another point to make there but hopefully it will come back but when i when i kind of look at to kind of follow the money over the last five years and it and i see that the uvm medical center not the network but the uvm medical center itself over the last five years uh up through 2019 accrued 295.8 million of the operating margin of 329.2 million and uh we have other hospitals that are hanging on by their fingernails something seems possibly awry to me in as the money comes out of ray payers pockets goes through the insurance system negotiations happen with these providers and it and and the flow of the money is heavily weighted i mean 89 you can do the math on that february 26 uh um notation that was in my letter to you folks um that seems to me a place where um the board might be helpful giving well the board might be helpful in in in setting some some boundaries that aren't up in the six seven eight nine percent world um so um there was one more thought i had and oh um in terms of the cost shift and again this is this is outside your domain but you know in terms of looking at it you know um uh where might we find more medicaid money you know or where could we have found more medicaid money to maybe balance the scales a little bit because if medicaid does contribute more then the cost shift might be nullified on you guys a little bit certainly not the 16 percent or whatever it is and so as you as as you follow the big items in adiba's medicaid budget um through the third quarter of the state fiscal year 2020 they had only spent and it was adjusted downward in the legislature's budget adjustment they had only spent 63 percent of their appropriation uh and but we are three quarters of the way through the year there are tens of millions and this has been going on year after year after year as the as the economy rose and when i was finance commissioner i saw the reverse of that you know it gets pretty scary when it's going the other way but um you know but but there's opportunity there um i think um you have doug hoffer's audit of dr dinosaur where he found that people were um not paying their premiums but still getting medicaid benefits and just the small sample he used was 2.3 million dollars that's um you know and uh you know you have the fact that dr dinosaur premiums um are lower today than they were in 2004 think about that and that's because they were taken out of the legislative domain and put into um uh the um uh the the agreement agreement with the feds the waiver way of 1115 waiver agreement so there are options out here if we think beyond this process um and um but within this process you know i i think it's an important venue for us to set expectations you know that it's it's it's not just the insurers have an obligation and the board has an obligation but other players um have an obligation or we're not going to be successful you know with with the agreement that that we've we've uh you know the journey that we're on so um that's more my rant than my questions but um i i i just think it's important that that we can be here and worried about all these kind of you know in the weeds about all these these technical issues and i'm certainly glad to go there but um i'm just not quite sure what what it will get us in the long run in the big picture okay board member hams okay thank you um i guess we all are asking you the same question paul how are you doing i'll be happy for that next break and i was thinking about i think this happened to me last year but i've always said i don't teach classes before or after lunchtime because before lunchtime everybody's starving and they just want to get out and after lunchtime they have a food coma 1241 so bear with me uh i know i'm the only thing between you and lunch actually chair mullen has to go too but um thank you for for bearing with all of our questions um and as a quick thought in reference to morine's uh you made a comment to morine if you can give us a longer runway we can achieve some cost savings and so tell us by 2022 so here's your runway by 2022 we got to get these premium growth rates to you know at the the wage growth in the state of vermont so if you need that runway i'm here i am giving it to you but anyway that's an aside can you just turn to um exhibit one page 33 if you would i'm there okay perfect i want it's at the bottom chart and you're talking about um the you know since 2014 implementing new programs to combat fraud waste and abuse um it in you know those programs increased rapidly over that time period you were able to recover more claims and in 2018 you've covered you know 1.42 percent claims the migrations when your platform slowed it down in 2019 and then you talk about due to COVID-19 you've stopped those programs and it's unclear when they will start again um so my question is around that why and and i understand that you may not be the answer you may not be able to answer the why question but if you could answer the why question i'd really appreciate it because it does seem to have an impact um on you know on rates and on affordability having those you know those programs in place so how has COVID-19 stopped the fwa programs yeah so i i'm not uh particularly closely involved with that decision but my understanding is that because providers have so much on this on their plates right now responding to the pandemic that we're trying to ease the burden on them in other ways uh we suspended some prior aughts and we've also made the made the decision this has been uh fraud waste and abuse activities just to ease that burden on providers during this difficult time okay um so let me follow up a little bit with that so now we know that for example you know utilization is has increased above capacity so to the degree that we'd want to really be vigilant about fraud waste and abuse now would be the time perhaps even more so recognizing that should there be a second surge or something like that we may want to cut back even you know providers are dealing with a pandemic but given the levels of infections that we have now and the increased utilization that we're seeing seems like now would be the time to to think about reinstating those programs and i just can you if you can turn to exhibit six of page 59 i want to be able to understand this it looks like to me and this is where we're looking at rbc um it looks like to me the impact of suspension of those audit activities has a rbc reduction of 19 percent which is actually greater the projected impact of 2020 operating results of 17 percent right so i mean the the magnitude is not insignificant it's in the notes it talks about claims will be about four million dollars above projections because of the suspension so i guess what i would ask is actually if you return to the 2018 levels for 2021 what would the impact be on the premium rate change oh that's an interesting question that makes me makes me think about my actuarial work a little bit um so we we did not assume in this rate filing that that fwa would go away um we assumed that um that it would maintain at the at the pre-covid levels so we we did make some adjustments in coming up with our utilization trend to to adjust for the fact that it's kind of varied over time but we did not assume in this filing that those fwa activities would go away and would continue to be gone for 2021 my understanding is that we've we've agreed to suspend those activities as long as the emergency order is is in place um beyond that i can't really speak to the timing of when we think those activities will come back but we do expect to resume them um at the at the well my expectation is that they will have resumed by 2021 i guess would be my best way of putting that well if you turn to page 34 just the next page it says you assume that the percentage of claims recovered through these programs will remain at approximately three quarters of percent of total bad claims right so you're assuming the same level in 2021 as in 2019 which is below the 2018 level right i guess what i'm asking is if you went back to the 2018 level what would be maybe you can answer later if that's helpful or oh that's okay uh so you know we're talking about that you know the delta from 2019 to 2018 uh looks like about 0.65 percent of claims yeah premium as we know is not exactly equal to claims so there's you know we do have some other items that are in there as well um and that'll be on medical claims only so i'm i'm trying to kind of talk through the answer rather than giving you a precise answer but we're we're probably talking about something that's that's less than a half a point on premiums thank you um and i know my colleague robin asked you about the why um cost containment programs were suspended i'm not going to ask you the why i know she'll ask mr garland later but i guess i did want to ask i did want to say um again on exhibit one page 14 it talks about the claims experience for 2019 this is in the first paragraph under 1.5 um claims experience for 2019 was very slightly favorable relative to the expectation embedded within the 2020 filing driven by 1 improvement due to you know blue cross blue shields cost containment programming that exceeded expectations so we know that the programming has an impact um on claims and on you know cost containment it seems to be working at least according to that so i guess my question to you would be actuarially trying to keep the actuarial questions for you if cost containment programming was the same as it had been prior to the platform being introduced and prior to COVID-19 what would the reduction be there in premium growth rate if there there wouldn't actually be one here the 1.3 percent that we're referring to in this paragraph has to do with the lab benefit manager that dr macintosh discussed um and those savings are well the savings that took place are included in the filing and we're assuming that those savings will continue into the future as well in fact we're assuming that the lab benefit manager will be able to hold lab utilization to zero to no increase at all um as we move forward in time so that those particular savings are most definitely already in here okay so do you know i'm not asking you the why but of the programs that were suspended if they were resumed what would be the impact do you have any sense of that i i don't think there would be an impact those that programming um we'll have already manifested itself in the experience like in the claims experience we use to develop this filing so by resuming them and allowing them to continue we we would we would assume that that would you know we would assume that the impact that they had in the claims experience will continue to be the impact that they have in the future and so um again i would not make an adjustment for that um assuming we turn them back on before 2021 okay um i had similar questions to maureen about the admin costs um in terms of per member per month you know it is a stark difference per member per month and i recognize that you would prefer to look at it as a percent of premium but you know whenever we can it's nice to see an apples to apples comparison right and when we look at two competitors in the same market with in the same state with roughly the same size member population that seems like the best apples to apples comparison one could possibly make and there is a significant difference in the per member per month administrative charge and so i i i know you've already tried to answer that i'm not gonna you know ask it again but i i would just point out that it you know on a per member per month basis it's very difficult to see that huge difference and not think what is underlying that so i don't want to give you the opportunity to just comment but if you just want to say it's better to look at percent premium i will i do think because of the variable costs that are involved it makes more sense to look at the at the percent of premium okay um a second another question is i you know we've talked a lot about the COVID-19 impact and a lot of modeling and i appreciate all the modeling that's been done i know how very difficult that is so many different assumptions so many different ways at which you could tackle that obviously the impact can be positive negative depending on whether the second wave what we think about with the third procedures the cost of vaccines cost of treatments all of that but one of the things that seems to me to be uh more predictable is the fact that telemedicine is probably here to stay right and not going away and we know that there are studies that are showing their significant cost savings associated with as we have more telemedicine ed visits go down you know urgent care visits go down which are very costly and your own modeling talks about a fortune in production and utilization um related to that telemedicine in those ways so i'm wondering why not carry that forward because that doesn't necessarily depend on how many cases we have whether there's a surge what the treatment costs of COVID are that's a change in demand that's happening because provider and consumer behavior has changed so why not factor that in to your assessment of costs and utilization we did um we have a section in the in the memo and i believe we repeated it in the addendum we are assuming that er and urgent care utilization will never return to pre-covid levels that assumption is is kind of belied by emerging june experience we'll see how that continues to develop but it looks like based on what we know today about june that that er and urgent care utilization did return to pre-covid levels that's a surprising result to me but we ignored that for purposes of the modeling and we did include an ongoing reduction of about 14 percent in er and urgent care utilization and recognition of the of the increase in use of telemedicine and so forth perfect i thought you had modeled it but i didn't realize you had included it so that is great answer to my question um looking i'm looking at all of my notes as well so is there and this might be a question for Ruth but i'll ask you anyway and you can tell me if it's more of a question for Ruth are there legal limitations on how CTR might be used so you know CTR is largely meant to cover medical costs unexpected medical losses things like that but to the extent that you know if Blue Cross was shielded let's just say wanted to build a new building new office building or wanted to do something would it come out of CTR are there any limitations is there any minimum that has to be kept in CTR to cover medical losses um so it's a good question it's a complex answer and Ruth will probably be able to elaborate it but you know dfr as our solvency regulator keeps close tabs of how we're spending our surplus what we're doing with it they had for example for vermont blue advantage which we've touched on a little bit that all had to be approved by dfr before before we spent that money and took that step so i i think i'll kind of leave my answer there it's probably just a starting point and Ruth will probably be able to elaborate on that okay great my last question is actually this is more of a curiosity but i just recently read that there are a bunch of news reports that premature births have plummeted as a result of COVID-19 and they can't figure it out why but it's happening in different countries and it's it's a very very significant drop in premature births and they're trying to unpack it and figure out why so i'm just this is a curiosity question but obviously premature births are extremely expensive and i'm wondering if we're seeing that if you're seeing that is this even a topic of conversation at blue cross that is fascinating i was unaware of that um and i i'm interested to go back and look at our own data i think our birth rate in vermont is not so i might have really good data on it um because you know just one or two premature births will really throw that that percentage around when we're talking about a small population like vermont but that that's that's really interesting and i i look forward to looking at our own data to see if we can find that here too yeah okay that was a curiosity thank you i have some other questions that i think probably will you know go towards executive sessions so thank you welcome thank you okay um i think i'm probably not the only one who needs a bathroom break so why don't we take five minutes come back to the chairs questions uh potential redirect i would just say we're again despite the pre-fail testimony behind where i was hoping to be at this point in the hearing so um just be aware of that we have so wouldn't it be more if you combined your bathroom break with the lunch break it would save five minutes sure we can do that if you want to go ahead and ask questions oh i was just saying that it'd be nice just to have one break i don't have to ask my questions now if people are crossing their legs but i'll leave it to you mr hearing officer does anyone need a five-minute break nope everyone's good all right mr chair thank you good afternoon mr schultz afternoon chairman earlier this morning you testified that retail pharmacy was cutting into margin and thus into reserves but isn't it true that blue cross made several changes to make it better for for monitors facing the pandemic by i believe in some cases allowing for 180 day fills and things like that yes uh suspension of uh early refill edits those sorts of things yes that's true so wouldn't you begin to see some savings from that since they won't need to get those medications over the next few months yeah for the for the most part we're talking about 90 day fills and those those programs were implemented generally in the late march your early april time frame so if we look at data through june um we will have seen sort of the full ebb and flow of that as as scripts were filled in early april for 90 days they don't have to be filled again until july so i i do think that we um we were able to assess that fairly by looking at data uh all the way through june okay thanks um last year you testified um about uh some savings that could occur it may have been the year before time runs runs by me now um through the opening of the asc have those um estimated savings come to reality um i i honestly haven't looked at those data um so that that's something i'd be happy to follow up on okay um sometimes it's uh as jogi barrow would say it's uh deja vu all over again or maybe i feel like i'm in groundhog day but um you testified that um really a lot of the um orders that the green mountain care board has offered in the past were really just a reduction to reserves and you also made the statement and i know that one member followed up on that that um you said um if you want us to achieve savings tell us to do it in 2022 why does the green mountain care board need to tell blue cross blue shield to try to be efficient you don't i mean and i i think we have lots of evidence for that in this filing and in previous filings we've saved over five million dollars for remote ratepayers through the actions that we took relevant to this filing the number i think was quite a bit bigger than that last year uh these are things we continue to work on we work on all the time um and so when you know when we already include those amounts those savings in our filing um what becomes really difficult is when we're then told go find one percent more and by the way go do it within the next four months that that's just not practical that that's the point that i was trying to make do you believe that blue cross has a responsibility to vermoners to operate efficiently yes i do okay um do you believe that blue cross is doing everything that it possibly could to be as efficient as possible offering um prevention programs that would have an ROI um in in the uh future and things like that that's uh that's maybe not a question for an actuary uh what i what i can tell you is that you know we we don't have carte blanche to just do whatever we want um there's often pushback from providers uh in some ways some of those programs that improve affordability also restrict access and so there's there's pushback from legislators uh and there can be pushback from members so you know we we can't just go out and implement everything we possibly want to in order to reduce the cost because there are a lot of trade-offs and a lot of interested parties uh that want to have a say in those matters but you'll admit that there could be some things that blue cross could do that could make it more efficient i i don't know that more efficient is the phrase that i would use there are steps blue cross could take to make things more affordable whether vermonters or whether the green mountain care board want us to take those steps and whether providers are willing to help us take those steps maybe a different question all together okay um in the testimony um by Dr. McIntosh there was a lot of questioning and i'm not sure this may not be for you and it may be for for Ruth but again um we were trying to get to the percentage of the more expensive hospitalizations that are carried through the exchange product as opposed to Medicare we know that there's a much older age demographic when it comes to hospitalizations in this disease Medicaid and third-party administered plans has any calculation been done as to what percentage of these more expensive hospitalizations relate specifically to the QHB? I don't have the specifics related to hospitalizations what I can say is that blue cross has spent four point four million dollars on COVID related costs uh so far this year okay I believe that you said earlier that um you do not have any involvement in either um investments as far as reserves or as far as reserves or in pension is that correct that is correct who are the people directly involved at blue cross blue shield who make those decisions uh Ruth Green is our CFO and treasurer and she will have the most insight into that process okay I'll save those questions for Ruth then um did you um do any type of review or have any input into the letter that Mr George sent to us in the latter part of June regarding the pension loss no I read the letter that was the extent of my involvement no editing or no correct I was not part of that process okay likewise back in March when we certainly were not aware of it but you reported to DFR according to press accounts that this problem had occurred did you have any involvement at that time in that reporting to the Department of Financial Regulation none okay those are all my questions everybody can go to lunch thank you chairman not quite um there we go opportunity for redirect for Mr is not for you I have no questions thank you okay now we can go to lunch um I was hoping to take an hour but it seems like that may be too long given that we have two more um blue cross witnesses the commissioner which I imagine you guys will have some questions for eleni and then mike fischer so so I'm thinking half an hour lunch break unfortunately what do folks think about that whatever you tell us better than five minutes all right why don't we reconvene at 140 sound good sounds great no sir okay thanks thank you