 the whole truth and nothing but the truth. So I hope you got. I do. Game of Spell of Hope. Good afternoon. Good afternoon. Could you please state your name for the record? Kevin Ruckerberg. And where do you work? Lewis and Ellis Incorporated. And what is your position at Lewis and Ellis? I'm a Vice President and Consulting Actuary. Okay. Can you please turn to Exhibit 24 of the binder? Yes. And do you recognize Exhibit 24? Yes. Do you recognize that? I do. Can you tell us what it is? It is my pre-filed testimony regarding these filings. Great. Can you briefly describe the information contained in that document? Yes. It briefly describes my educational and professional background. It describes our process of reviewing these filings and it describes our recommendations to the Board about those filings. And is the information in this document accurate and correct to the best of your knowledge? It is. Is there any information in this document you would like to change or clarify at this time? No. And do you wish to adopt this pre-filed testimony as part of your testimony today? I do. Can you briefly explain your role in Elleny's review of this filing? Yes. I review all aspects of the filings. I direct internal analysis and discussion regarding our recommendations and our information requests that we send to Blue Cross. I direct the communications between Lewis and Ellison Blue Cross and I contribute to the drafting of our report. And how do you submit your recommendations to the Board? We submit our recommendations to the Board in a report submitted on Day 60, that is 60 days after the submission of the filing. Those reports are Exhibit 17 for the individual rate filing and Exhibit 18 for the small group rate filing. Correct? Correct. Do you have any changes to the individual report that you wish to make at this time? I do. In the individual report, we opined that we believe the COVID adjustment was reasonable. That opinion was based on repeated assertions by Blue Cross that aggregate 2021 medical utilization was lower than aggregate 2019 medical utilization. After we submitted our report, we received Mr. Schultz's supplemental pre-filed testimony, which claims the contrary. So I am no longer comfortable claiming that the COVID adjustment is reasonable. However, we were aware that there seemed to be some sort of tension between the COVID adjustment and the utilization trend being assumed. We note this in our report and it was part of why we recommended that the utilization trend be reduced. Therefore, while this does provide additional information and I think helps to clarify what information we were provided is accurate, I do not think it needs to change our recommendation regarding the proposed rate level as contained in the individual report. Just to clarify, you don't believe there'll be any change to your recommendation regarding the utilization trend? Is that right? That is correct. And do you have any changes to the small group report that you wish to make at this time? Only the exact thing I just described in relation to the individual report. Now, can you please explain your standard of review? Yes, we review the filings for actuarial soundness. We review them to determine whether or not they are inadequate or excessive. We also review them for whether they are unfairly discriminatory. Do you review for affordability? No, we do not. Using your methodology and standard of review, did you make any recommendations to modify these proposed filings? Yes. If all of your recommendations were to be implemented, can you explain what the ultimate projected rate increase for the individual filing would be? It would be 11.2 percent modified by whatever the difference is between the unit cost assumptions made at the time of the filing and those updated for the more recent hospital budget information. And if all of your recommendations were to be implemented, can you explain what the ultimate projected rate increase for the small group filing would be? 11.6 percent with the same caveat that is modified by whatever ultimately becomes the most accurate information available at the time of the order regarding hospital budget submissions. And do you find the 11.2 percent increase in the individual filing and the 11.6 percent increase in the small group filing reasonable? Again, with that important caveat, yes. That caveat being the ultimate decision about hospital budgets? Yes, I'm sorry. And can you tell me why you find your rate recommendations reasonable? Yes. Firstly, we recommend that information which was not available at the time of the filing be considered by the board in updating the rates. I believe that the most reasonable way to set the rates is to use all information available at the time. Second, there were a few errors in the filing that I think are undisputed such as the unit cost issue. Our recommendation is that those be corrected. Lastly, our recommendation addresses what I perceive to be a inconsistency within Blue Cross's filing regarding the COVID adjustment and the utilization trend. Having made those changes, you believe the rates appear actually sound adequate, non-excessive, and not unfairly discriminatory? I do. And have you reviewed the other pre-file testimony in this proceeding? I have. Have you listened to the testimony today so far? I have. Can you please discuss your recommendation about updating hospital budgets? Yes. A significant portion of the premium that we're discussing today will be paid to Vermont hospitals. The prices paid by Blue Cross to those hospitals are yet to be determined. And between now and well between the time of the filing and when the board will make a decision regarding this filing, new information has come to light and may continue to come to light in order to ensure that the premiums are consistent with the benefits that they'll be covering. We recommend that the board consider any updated information available at that time. And having reviewed the pre-file testimony and listened to the testimony today so far, do you wish to amend or add to Elleny's recommendation about updated hospital budget information? I do not. Can you please discuss your recommendation about correcting the unit cost trend calculation? Yes. Blue Cross uses a spreadsheet and provides that spreadsheet as part of their filing to determine what the aggregate impact of the rate changes by hospital is going to be on the premium. They found an error in that calculation during our review. We believe that errors of us or should be corrected. Having reviewed the pre-file testimony and listened to the testimony today so far, do you wish to amend or add to Elleny's recommendation about correcting the unit cost trend calculation? I do not. Can you please discuss your recommendation about correcting the unified rate review template for the ARPA adjustment? Yes. The unified rate review template, BRRT, is a reporting tool required by the ACA nationally. Carriers fill it out basically to report in a standardized way how various factors relate their 2021 experience in this case to the proposed 2023 premiums. One of the items that carriers are requested to report in that exhibit is the impact of changes to the morbidity of the population. That is changes to how sick the average person is. Blue Cross has made an adjustment to their experience because they believe that the American Rescue Plan Act is going to impact population morbidity. We have opined that that adjustment was reasonable, but Blue Cross did not report it as part of the population morbidity changes in the URRT. So our recommendation is merely that the reporting tool be updated to more accurately reflect their pricing projections. That recommendation does not have any impact on the proposed premiums. So having reviewed the pre-file testimony and listened to the testimony today so far, do you wish to amend or add to Elleny's recommendation about correcting the URRT for the ARPA adjustment? I do not. Can you please discuss your recommendation concerning updated risk adjustment transfers? Yes. In a manner somewhat similar to the hospital budget issue, there's information that was not available at the time of the filing that is now available. In particular, that relates to the money that Blue Cross is owed by MVP for the relative risk of the members that they enrolled during 2021. As such, that is effectively part of their base period experience, and in general it would not be reasonable to evaluate that base period experience only in part or only based on outdated information. So we have recommended that the accurate finalized payment from MVP to Blue Cross be recognized and incorporated into the rate development. So having reviewed the pre-file testimony and listened to the testimony today so far, do you wish to amend or add to Elleny's recommendation about risk adjustment transfers? I do not. And can you please discuss your recommendation concerning the update to the HDHP cost sharing? Yes. The rates that were initially filed in these filings assumed benefits for high deductible health plans that ultimately will not be permissible for high deductible health plans. As such, the benefits have been changed, and in order for the rates to be actuarially sound, the premiums need to change in accordance with the benefits. So we have recommended that the premiums be updated to reflect those modified benefits. And having reviewed the pre-file testimony and listened to the testimony today so far, do you wish to amend or add to Elleny's recommendation regarding the HDHP cost sharing? I do not. Can you please discuss your recommendation concerning the modification of the medical utilization trend? Yes. Blue Cross proposes their utilization trend for medical services across five service categories. We reviewed each of these, and we believe that there are errors in the development of those as well as other methodological concerns and internal inconsistencies. As a result, we have recommended changes to the medical utilization factor. What errors do you reference in regard to the utilization trend? Most notably, the initial filing for the facility trend, the professional facility trend. I apologize, the naming here is a bit confusing, but firstly facility, second facility professional, and third, the other professional. Those three categories were supported in the initial filing by regression analyses that improperly did not consider the relationship of COVID-19 to the historical data. What other flaws do you see in Blue Cross's proposed utilization trend? For the other professional, the reasoning given in the filing for the proposed 1.0% utilization trend was that the data available was not sufficient in order to modify last year's assumption for the same item. However, the filing then proposes to modify it from 0.5% to 1.0%. We consider this flaw in the reasoning and recommended that that be changed. Additionally, as I have noted, the trend calculations as supported today rely on the COVID adjustment. The COVID adjustment was calculated based on firstly the assumption that trend is 0% and second, the claim that total 2021 utilization was lower than total 2019 utilization when aggregated across all service categories. The support for the utilization trend seems to disagree with this claim about 2021 utilization and additionally then uses that adjusted data to argue for a non-zero utilization trend. So methodologically speaking, I have concerns that there's some circularity and internal inconsistency in the filing when understood holistically. Could you please show us where in the record the claim about 2021 utilization being lower than 2019 utilization can be found? I can, yes. Most clearly, I think would be exhibit 13 page 10. I'm sorry, I'll wait for you to get there. Thank you. Yep, I have it. Okay, so there is a lot on this page and I will revisit the earlier parts of this document that I think describe it in clearer detail. But notably, this is labeled total ACA experience by type of service and it compares average contract year 2021 utilization relative to a benchmark which it defines as 2019 through February 2020. Below the big box, you can see the word total and next to it it says minus 2.8%. While it is possible, I have misinterpreted this exhibit. What we understood this exhibit to claim at the time of our report was that total utilization across all medical service categories was 2.8% lower than described as the pre-COVID benchmark which is based almost entirely on 2019. I will acknowledge that technically it is not exclusively 2019. However, to explain the difference between this number and what is contained in Mr. Schultz's supplemental profile testimony, the 2020 January and February experience would have had to have been truly outstanding outliers such that they really should have been addressed explicitly. Now, that is not the only time that that claim has been made and I think this document clarifies that our interpretation of this is at least approximately correct. If we back up to exhibit 13 page 2, we can see the third paragraph starting with the second sentence. While many months were impacted by a high level of deferred services, others were impacted in the opposite direction by returning care. The net impact was very close to zero for calendar year 2021. Now, that is referring to non-emergency services and so I do believe that is consistent with the exhibit I just showed you which says minus 2.8%. But it is not consistent with attachment A as provided by Mr. Schultz, at least to my understanding right now. We can then go further down on this same page. We see the final non-intellicized paragraph. The second line has a sentence beginning with rather our conclusion informed by an examination of actual experience data is that the net impact of COVID-generated deferred and returning care on the 2021 utilization of non-emergency services was not demonstrably different from zero. Now, again, I believe that is in reference to a number that is 0.8% in the exhibit I just showed you, which is negative. I believe a similar statement is made in the initial actuarial memorandum, but I think it is generally consistent with what I have described here, so I think it is reasonable to move on. Having reviewed the pre-file testimony and listened to the testimony today so far, do you wish to amend or add to Ellen's recommendation regarding the medical utilization trend? No, I do not. And after reading the carrier's pre-file testimony and all of the materials that have been submitted so far in the filing and then listening to today's testimony, is there anything you wish to add or change to the six recommendations we have covered so far? There is not. And if your recommendations as of today are implemented, do you believe the rates would be excessive? No. Do you believe they would be inadequate? No. And do you believe they would be unfairly discriminatory? I do not. Thank you. I have no further questions at this time. Mr. Battles, do you have questions for Mr. Regeler? Yes, I do. I have a couple questions. I'd also ask the board's permission to call Mr. Schultz as a rebuttal witness to address some of the discussion that we just heard. I'll proceed first with questions. Good morning, Mr. Roggeberg. Nice to meet you. Good morning. It is still morning where I am. Good afternoon. I'd ask you to turn to exhibit 17. And this is the actuarial opinion that Lewis and Ellis prepared for Blue Cross's individual or rate filing, correct? Correct. Okay. And if you could turn to page 20, let me know when you're there. I'm there. Okay. And if you could read the first full paragraph on page 20 that starts with the word so. So while we agree with Blue Cross Blue Shield in Vermont that the 0.1% reduction to claims is reasonable if the subsidies are extended, an increase to rates would be appropriate based on current law. Last year, Blue Cross Blue Shield in Vermont estimated the favorable impact of the subsidy enhancement to be a 0.7% reduction to individual premiums. As an estimate, we assume that the termination of the enhanced ARPA subsidies would necessitate a 0.7% increase to the rates. Thank you. So, did Blue Cross assume in its proposed rates that the ARPA subsidies would be extended and that this extension would reduce premiums in the individual market by 0.1% Yes. And is it correct that Lewis and Ellis found that if the ARPA subsidies are extended, that that estimate of a 0.1% reduction is reasonable? Yes. Is it also correct that Lewis and Ellis estimated that if the ARPA subsidies are not extended, that this would necessitate a 0.7 increase to premiums? That is our estimate, yes. And do you agree that the difference between a 0.1% reduction and a 0.7% increase is 0.8%. I do. Is it therefore reasonable to assume that if the current law remains in place and the ARPA subsidies are not extended, that the costs to Blue Cross are providing coverage in the individual market will rise by 0.8%. I believe that is a reasonable estimate, yes. And if that were to happen, do you agree that Blue Cross' effective contribution to reserves will be reduced from its file level by approximately 0.8%. I do. Thank you. And I would ask you to next turn to exhibit 23. And specifically page 14, is this document the University of Vermont Health Network's fiscal year 2023 hospital budget submission to the Green Mountain Care Board? I'm sorry. I'm not seeing page 14. It might have gotten lost somewhere. Is that Blue Cross'? So this is, I was referring you to Mr. Schultz's supplementary pre-filed testimony which attached the UVM network submission. Yes. And so the, I'm sorry, it's a, so now we're looking at page 27 of exhibit 23. Give me just a moment to get there. I apologize. The red page numbers on the bottom. Okay. Exhibit 23 page 27. Yes. I'm there. Okay. And so this is, this is the UVM health network's recent budget submission. Is that correct? Yes. Okay. Can you please find the paragraph about halfway down the page immediately preceding the bullet points and read the sentence that begins, we have chosen. We have chosen to focus on solutions that will make the best use of the talent, skill and capabilities of our people to improve access to care while increasing revenue in fiscal year 2023. Thank you. And do you agree that increased revenue for facilities means increased claims costs for payers? Yes. Okay. And can you please read the next sentence on that page and the first sentence of the bullet point that follows? Some initiatives that will help ensure our sustainability include innovation in managing the use of acute care patient beds and post-acute beds and expansion of surgical capacity. Did you say read the first sentence of each bullet? No. Just the first one. Thank you. And so if that initiative that is described in that bullet you just read is successful, do you agree that that would increase utilization and thereby increase future trend above recently observed levels? Yes. Assuming that similar expansions weren't occurring during the period during which the trend is calculated. Understood. And then if you could turn to the next page and read the third and final about that page, page 28. Addressing the backlog in delayed care by reducing the wait times caused by the pandemic and made worse by the workforce crisis. And same question. Do you agree if that initiative was successful that that could also increase utilization and thereby increase future trend above recently observed levels? Not if the recently observed levels already reflect a buildup of, you know, addressing the backlog of delayed care. So to the extent that 2021 is already elevated due to providing previously deferred care, it would not raise utilization above the observed level. But to the extent there is additional backlog that has not reflected in recent initiative levels and it would correct. Well, to the extent that the backlog is being addressed faster than it was being addressed in 2021, yes. But the continued existence of a backlog would not mean that. No. I understand. Thank you. And I have no further questions at that time, but I would ask the Board's permission to call Mr. Schultz in rebuttal after Mr. Angoff passes and the Board have their opportunity. Mr. Angoff, do you have questions for Mr. Rutherford? Yes, I do. Hi, Mr. Rutherford. You said that it's still morning where you are. Where are you? I am in beautiful Plano, Texas, just north of Dallas. So you're on central time. So right now it's good afternoon, Mr. Rutherford, right? It just became good afternoon, yes. All right, sorry. So you concluded based on your analysis that the rates that Blue Cross had proposed, as amended by Lewis and Ellis, are not excessive, inadequate or unfairly discriminatory, correct? Correct. Okay. You didn't conclude that they were affordable, right? That wasn't part of your job. No. And you didn't conclude that they promoted quality care? No. And you didn't conclude that they promoted access to health care? No. And you didn't conclude that they're not unjust, unfair, inequitable or misleading, right? We do opine, I believe, that they're not unfairly discriminatory, which I think would definitely overlap with that a little bit. Agreed. With the exception that you did conclude that they're not unfairly discriminatory, you did not conclude that they're not unjust, not inequitable and not misleading. Correct. And you certainly didn't conclude that they're not contrary to the laws of the state of Vermont? I don't believe we opined that. Now, if I was aware of them being contrary to the laws of Vermont, I believe I would have raised concerns about that. Okay. But you're not a lawyer? I'm not a lawyer. No. Okay. I certainly cannot opine that they are definitively in compliance with all of Vermont law. Very good. And when you concluded that the rates proposed by Blue Cross as amended by L&E are not excessive, inadequate or unfairly discriminatory, you weren't saying that those are the only rates that could be not excessive, inadequate or unfairly discriminatory. You are correct. Okay. So rates that were a little higher than the L&E recommendation could be not excessive, inadequate or unfairly discriminatory. Possibly, yes. Okay. And rates that were a little lower than what L&E recommended would be not excessive, not inadequate, and not unfairly discriminatory, correct? Possibly, yes. Okay. So there's a range, isn't there, of rates that fit within that category of being not excessive, not inadequate, and not unfairly discriminatory, right? Yes. Okay. How do you determine what that range is? What that range is? So for the actuary developing the rates, there's a long list of assumptions that need to be considered, some of which are interrelated with each other. And generally what the actuary should do is to consider what they think be, I won't say the most likely outcome. I'll say basically the middle of the range of reasonable rates is generally what should be done. I will say carriers can and sometimes do insert what they would call risk margins into their CTR assumption, which is effectively to build the rates off of an assumption which is slightly more conservative than their best estimates. When we evaluate the proposed premiums, we are evaluating whether we believe they fall within the range of reasonable. Okay. And is there any formula that determines how wide that range is that you rely on? There is not. The actuarial guidance is perhaps unfortunately thin in that regard. Then how do you determine how broad the range is of rates that are within the zone of not being excessive, inadequate, or unfairly discriminatory? I would not say that there is any sort of clear algorithm for arriving at that point. It is, that is most of what is important in actuaries professional discretion, which we develop as part of our working experience and why we generally work in the industry for a while before opining on such things. It is generally going to be a function of how uncertain the results are. And I will note that at this time, the level of claims in 2023 appears very uncertain. So, I do not think there is a particularly narrow range here because I do not think there is clear information about exactly what is going to happen on several things, right? ARPA, COVID, the utilization trend. Our determination that we did not believe the medical utilization trend fell within a reasonable range is that we did not see internally consistent method producing the result that Blue Cross was proposing. So, you are saying that Blue Cross's recommended proposed utilization trend was not even within the range of recentfulness? You are saying that is outside the range of recentfulness? Yes. And I know you talked about this before and I apologize because I did not get all of it, but I know you said there are COVID adjustments, but let me start this way. Despite your best efforts and everyone else's best efforts, no one knows what the coronavirus situation is going to be in 2023, right? Right. Okay. And so, because of that, the range of reasonableness, well, the uncertainty with respect to this filing is even greater than the uncertainty would be with respect to any other filing because of the uncertainty about COVID 2023, right? I am not comfortable saying any other filing. There are a whole lot of special circumstances out there. It is, I would say, more uncertain than the median filing. Very good. Okay. Could you turn to page one, please, of exhibit 17? Yes. Okay. And that is your report, right? It is. Okay. And you see down there, there is a little chart of the members by year that Blue Cross has had in the small group and individual market. You see that? Yes. Okay. Did you do any analysis of the morbidity of the membership that was left after the rate increase of each year in that table there? I don't have data on those members other than the summaries of the analysis Blue Cross provides regarding that point. So I did not perform any analysis other than reviewing the materials provided in Blue Cross's filing. Okay. And do you have any opinion as to the morbidity of the consistently decreasing membership in Blue Cross over the last five years? I apologize. The question over the last five years is very difficult to answer off the cuff. Is there a period of years during which you would, that question would be less difficult to answer? As I recall today, I believe there was evidence as of the filings in roughly 2020 that suggested that possibly there were morbidity increases going from 2017 to 2018. I'm very hesitant to answer this question based on my limited memory of this, but as I sit here today, I believe we noted at that time an increase in Blue Cross's risk score that would be consistent with healthy members having left. So my morbidity increase, does that mean that health status of the book of business is worse than it was previously? Yes. Could you turn please to page two of exhibit 17? Okay. Okay. And you see there, the metal levels have different percentage change increases. You see there? Yes. Okay. And you see that the platinum, the increase for the platinum plan is 7.2% substantially greater than all the increases for the other metal levels. Yes. Okay. Is that, could that result, could the fact that the increase for the platinum, the most generous plan, the fact that that increases is so much greater than the others, could that produce a death spiral? That is, could that result in just consistently less and less healthy people being in the platinum plan because the more healthy people, even out of the group of less healthy people would not find that it makes any economic sense anymore? It could. However, I'll note that the, okay. So two caveats to that response. Firstly, the ACA requires that all of the metal tiers be rated as a single risk pool. So the platinum plan really can't experience a death spiral without the entire block experiencing a death spiral because it's not rated separately from the other metal tiers. Second, I'll note that while I don't have numbers in front of me, my general understanding is that members who are purchasing platinum plans are as a cohort extremely sick, such that most of them it would be, it would be against their best interests to shift down to a lower metal tier. So as a practical matter, are you saying that, is it fair to say then that move cross can really raise the rate to these people by a substantial amount without a material number of them leaving? I think that's possible. I don't have data on exactly what the distribution of those members morbidity looks like. I am being more speculative than I ought to be, I think, in this response, and I want to make that clear. You have made it clear. Okay. Could you turn please to page six? Okay. Okay. And down close to the middle of the page, you see the heading medical unit cost trend? Yes. Okay. And under there, you say to project medical unit costs forward from 2021 to 2022, actual negotiated provider payment changes were used. Can you explain to me what you mean by actual negotiated provider payment changes? Yes. Most of the assumptions we discuss in this filing are as yet undetermined. We don't actually know what their value will ultimately be. However, in regards to the prices paid by Blue Cross to hospitals during 2020, that is a settled issue. I suppose the mid-year increase is to complicate that slightly. But accepting that caveat, going into 2022 and therefore at the time of this filing, Blue Cross knows the rates being paid in 2022 to their network hospitals. So there's not assumptions necessary in setting that. So those are hard numbers, people are looking at. Correct. Okay. And unlike in most cases, the numbers that you look at and evaluate the reasonfulness of are estimates. Correct. Okay. I might have been thrown by the negotiated word. You are you didn't examine, did you, whether in fact Blue Cross negotiated with the providers on the rates that you incorporated in your analysis? Did you? I am not privy to the nature of those negotiations. Fine. Okay. Could you turn to page eight, please? And I'm not going to continue to beat a dead horse on this. I just want to understand it a little bit better. The, you told Mr. or you told me as Bellovo that the COVID adjustment that Blue Cross used may not be reasonable. Correct. Okay. Could you explain that as simply as you can to a non-actuary? Yes, I can. My understanding of these two aspects of Blue Cross's rate submission, which are two of many, but for simplicity's sake, let's focus on these two. We have the COVID adjustment and the utilization trend. Each of those involves assumptions and looking at the data and then drawing conclusions. Because the COVID adjustment is used in arguing for the utilization trend, I think it's reasonable to present it sort of chronologically as first and then progress through the utilization trend. So I would like to, at a high level, describe the logic of those two adjustments all at once and describe why I don't think it's consistent. Blue Cross asserts, I believe that total 2021 utilization is lower across all medical services than total 2019 utilization. They attribute this primarily to emergency services and say that all of the other services appear to have been in line with 2019. That is to say 2021 is lower than 2019. They then say, assuming that medical utilization trend is zero, that would imply that COVID suppressed 2021 utilization. Now, given those two assumptions, that's very reasonable. However, Blue Cross then takes that COVID adjustment that they calculate using that strain of logic and applies it to the 2021 utilization. And then, as is presented in Mr. Schultz's supplemental pre-filed testimony, his exhibit 23 on page 12, Mr. Schultz states that total medical utilization was about 3.5% higher in 2021 than in 2019. And then on this basis asserts that medical trend is not zero is actually about 2% per year. So within this fairly straightforward thread of logic, there appear to be two inconsistencies. First, the assumption that medical trend is zero, which then informs the assumption that medical trend is not zero. And more importantly, the claim that 2021 utilization is below 2019 and then subsequently the claim that 2021 utilization is above 2019. So by my read of all of that, something has to be at least misleadingly misrepresented. Or I have to be sorely mistaken about what is contained in this filing. Thank you. I understand that. Then in your opinion, what is the reasonable range of utilization trend? I am hesitant to opine on the entirety of that range, given the outstanding questions I have on precisely what it is that the data says. Okay. Well, would a 1% trend be reasonable? 1% for what value? The total medical utilization? Yes. Based on the information in front of me, I believe a 1% would probably be reasonable. Would a half a percent trend be reasonable? Probably not. There are components of the medical utilization that appear to be unequivocally increasing. That's mostly the mental health and the medical prescription stuff. Both of those are increasing at substantial levels for reasons that are clear, independent of the data. I do not believe it would be reasonable to assume zero for those. And I believe if you were to leave those unchanged, it would produce something between a half a percent and 1%. So somewhere in that range is where I'm going to get very uncomfortable calling something reasonable. Something within what range you would find? The range of a half a percent to 1%. Between a half a percent and 1% you would what? I think based on the information I have now, the line where I would say an assumption would be unreasonably low. Okay. And we're talking now about trend for the overall utilization trend. Yes. Okay. And 1% would be reasonable. Based on the information I have now, I have pointed out I have questions about the data that I have now and I would prefer not to opine on numbers very clearly without resolving those concerns. But you have opined that Blue Cross' selection is unreasonable, correct? And that selection was what? About 2%. So go to the bottom of page 10, please, and in the last paragraph. I'm sorry, page 10 of what? Of exhibit 17. And that paragraph talks just about the facility trend, right? Correct. Okay. And so for the facility trend, you are recommending be reduced to 1%, right? Correct. Okay. And would it be reasonable? Is there some zone, some range below that 1% that would also be reasonable? Yes. And do you have a feel for what that range would be? Again, I would prefer not to answer that question without hearing from Mr. Schultz's rebuttal regarding exactly why the filing materials appear to be inconsistent. I am cognizant of my actuarial standards of practice that suggest I should not rely on data that I have these sorts of concerns about. And in this case, you have concerns about the data that you have relied on? Is that right? Yes. And that is basically because using the logic that Blue Cross presented regarding the COVID adjustment, which is to say that they assumed there was zero trend and then attributed any changes to COVID. Using that logic and attachment A, as provided by Mr. Schultz, would suggest that there should have possibly been a COVID adjustment in the opposite direction. I'm not comfortable opining that that is appropriate because there's a lot of contingencies to that. But given that, it is very difficult for me today to assess the utilization data provided. Given that it's difficult for you today to assess the... It is difficult to assess the utilization data that Blue Cross has provided. Okay. And based on that difficulty, you've concluded what? At the moment that I would not like to opine on utilization trend numbers other than what we put in our report. Again, there's no formula that you follow that allows you to evaluate whether an assumption is reasonable or not, right? There is not. It's just your judgment. Correct. My judgment guided by the actuarial standards of practice and my education and work experience. Could you turn please to page 11 of exhibit 17? Yes. Okay. And there are numbers having to do with mental health utilization. And you see there on the right, the one-year trends are declining, correct? Correct. Okay. So why would it not be actuarially justified to conclude that mental health trend is declining? I do not believe it would be appropriate for me to state that the assumption should be reduced because I do not believe there is clear evidence that it will continue moving downward in the short term. I do not believe we opined that a lower number would be unreasonable. Say that again. I do not believe we opined that a lower number would be unreasonable. Okay. How did you conclude that Blue Cross' use of an 8.5% mental health utilization trend is reasonable? Because it is in line with the most recent three years of increases. With those increases. Sorry, go ahead. And because of the supplementary information that Blue Cross provided describing efforts to expand access and things of that sort. But you agree, don't you, that mental health mental health usage increased during the pandemic? Correct. Absolutely. Okay. And so if you assume that the COVID pandemic is going to go away at some time and then its effects are being reduced today, wouldn't you expect that mental health usage would also decline? No, not necessarily. As is noted on this page, mental health was already increasing rapidly prior to COVID. While there is a good chance that some of the increases that have been observed during COVID are actually results of COVID, I do not think it is necessarily appropriate to assume that utilization would return all the way to pre-COVID levels. There are other trends at play, including removal of social stigmas around seeking treatment and expansion of the provider base and things like that, such that I do not think all of the observed increases are a result of COVID. Sure. But there is a big difference, isn't there, between on the one hand mental health usage returning to pre-COVID days and on the other hand, it's going up 8.5% a year. That is true. However, it is, I think, entirely reasonable to think that mental health utilization will increase by the 8.5% or perhaps more in line with, say, the 11.2 or the 9.8 that has happened recently. I don't think it is particularly appropriate to assume that it would be zero, change moving forward and certainly don't think there is any reason to believe it is actually going to decrease. So I don't think a best estimate would be anywhere near assuming that it stops increasing. Sure. But I am not suggesting that it stopped increasing. I guess I am just asking you, isn't it reasonable that the increase could be less than 8.5%? It absolutely could be less than 8.5%. Okay. Could you turn please to page 14 of your report. Yes. Okay. And so I am just looking at those two summary tables and you agree with me. Don't view that for inpatient, inpatient, Blue Cross says 1.5, you say 1. For outpatient, Blue Cross says 1.5, you say 1. For facility, professional, Blue Cross says 1.5, you say 1. For other professional, Blue Cross says 1. You say 0.5, right? Okay. My only question is with all those differences, I would think that the difference in the total would be more than the 4 tenths of 1% between 2.0 and 1.6%. Can you tell me why the total is only the difference between 2.0 and 1.6? We have made recommendations that we believe move Blue Cross's assumption into the range of reasonableness. That does not necessarily mean that the concerns we raise would not produce a best estimate which is lower than the 1.6. Could you turn please to page 16? Okay. And there we're talking about utilization trend for non-specialty drugs. I'm sorry, the second paragraph. You see that? Yes. Okay. And so are you saying that based on the 1.4, the 3.2, and the 1.3, a 2% trend is reasonable? Yes. Okay. And how did you figure that out? It's fairly consistent with the most recent three years of trend, which is a methodology that Blue Cross has used and said they consider reasonable fairly consistently during my time reviewing their filings. Okay. But you didn't add those three together and then divide by three, right? You just looked at it, correct? You didn't add those three together and divide by three? I very well might have done that. What back of the envelope calculations I did when reviewing this item, I can't say for sure. Okay. But in opining that an assumption here is that Blue Cross made is reasonable and appropriate. Can you explain to me the process that you went through? Yes. We reviewed the data that Blue Cross provided as well as all of the narrative information they provided in addition to it. We believed that all of the information provided in totality supported the 2.0% utilization trend as a reasonable selection. Okay. And what a trend of less than 2.0% be reasonable? I have to say I haven't reviewed all of the relevant information regarding this exact assumption in a bit. I'm not really prepared to opine on that right this moment. Okay. But in opining that the 2.0% was reasonable, you weren't saying were you that that was the lowest reasonable assumption? Were you? No, we were not. Okay. Could you go down to the fourth paragraph on page 16? Yes. Okay. And there Blue Cross selected a 10% trend based on the three numbers of 7.1, 7.0, and 10.1. Do you see that? I do. Okay. And you all find that that trend is reasonable, correct? We did, yes. Okay. But looking at those three numbers, it's certainly the case, isn't it, that a trend less than 10.0, it's somewhat less than 10.0% also would be reasonable, correct? No. I disagree. Utilization trend and unit cost trend are two very different concepts. Unit cost trend is impacted by general inflation because it is itself basically a component of inflation. We know that inflation across industries, across sectors, across products is elevated right now over what it was during the period that this data describes. So I do not think it is reasonable to assert that all reasonable assumptions would necessarily lie in the range of what was recently observed. I'm not asking you to sell a cert. I'm only asking you whether it would be reasonable based on those three numbers to select a trend estimate of somewhat less than 10.0%. I am not sure it would be appropriate to set that assumption based on those three numbers alone. So the question, would it be reasonable to set the assumption at a particular level based on these three numbers? Is that reasonable? I think the answer is no, because more than just those three numbers matter for the setting of this assumption. Okay. But you're not opining that the 10.0% is the lowest reasonable trend that could be selected, correct? We are not. Okay. Could you please turn to page 17? I'm there. Based on those numbers, what's the reasonable trend range? Based on the numbers in the table at the top? Yeah. And the top box showing the four year to years. I don't think that box alone and answer that question. Okay. And what else do you need to answer that question? There is more detailed information provided by Blue Cross in the filing regarding monthly numbers, the breakdown by brand generic specialty, all of those things. There is general knowledge about the change in the inflation environment. Blue Cross provided several pages of description of how they arrived at that assumption and we reviewed all of it. We did not review just those numbers. And it would not be reasonable to review just those numbers and opine on the assumption. Could you turn please to page 23? I'm there. Okay. There's the bullet and then one, two, three. The third paragraph, you found that Blue Cross admin costs ranked 10th out of 62 plans assessed. Do you see that? I do. Okay. And that's 10th highest, right? Not 10th lowest. Correct. Okay. But then in the next paragraph, you say that Blue Cross used to be on the low end of administrative costs? Correct. Okay. Did you do any analysis to determine how Blue Cross came from being on the low end of administrative costs to on the high end of administrative costs? Blue Cross's actual administrative costs, PMPM, have increased substantially in recent years. That is based on statements by Blue Cross that I have not audited. But I understand it to be true and I don't find it surprising given the loss of enrollment that they've experienced. So, and you may have heard this discussion before, then you agree that as enrollment as Blue Cross has lost business over the years, administrative costs per member per month have gone up, right? Generally, that has happened. Yes. But if Blue Cross, now let's assume Blue Cross has bottomed out and it's going to start gaining a little business, you would expect administrative costs to go down, right? Yes. Okay. Could you turn to page 24? And in the first paragraph there, you say you analyzed 442 carriers to see what their CTRs were. You see that? Yes. By the way, is there any other state that calls what is called a Vermont CTR, the call that use that terminology? I certainly can't answer that for all states. Off the top of my head, I'm not sure that I can think of any. What do they usually call it? Contribution to surplus, right? Or profit margin or risk margin, profit and risk margin sometimes. Okay. But it's the same thing. Correct. Okay. Among those 442 carriers, those included both non-profits and for-profits, right? Correct. Okay. Did you do any analysis to determine where Blue Cross's CTR ranked among the non-profit carriers? No. Okay. In the second to last paragraph on that page, the last sentence, you say L&E believes a reasonable range for the base CTR is 0.7% to 3.7%. You see that? Yes. Okay. How did you come to determine that? As we noted in that paragraph, I think it's in that paragraph, Blue Cross reduces the CTR that's actually in the rates by about 0.7% to basically not build in the cost of COVID treatment into the rates. As such, the base CTR is 0.7% higher than what effectively the CTR is in the premiums. So this sentence can be read to say that we think a reasonable range for the final CTR would be from 0% to 3%. Sorry, I didn't mean to cut you off. I will note that a 0% CTR is not something to be taken lightly. And while if Blue Cross had submitted that 0.7% as what they wanted to be in their rates if they made that business decision, I would have found it reasonable. I very much would not have been comfortable recommending that it be reduced to that level given what I know about Blue Cross's financial situation. Explain to me that I understood what you said, but why would your decision as to whether or not it's reasonable depend on what Blue Cross felt? So ultimately, Blue Cross is responsible for ensuring that they can maintain adequate capital to meet their obligations. They understand the particulars of exactly what they need to make that happen in more detail than I do. Particularly on issues like this, I don't think it is appropriate. I don't think it is appropriate to view my range of reasonable with the same consideration as Blue Cross's actuaries range of reasonable. For instance, carriers somewhat often file negative CTRs or negative profit margins or however you want to label it. It can be reasonable for them to make the business decision that they wish to lose money. And if they have determined that that is a sound financial decision, I as a reviewer might well call it reasonable. However, I as a reviewer have difficulty imagining a scenario where I would recommend a substantially negative CTR in a filing. I understand the difference. When you say make a decision to lose money, what you mean, don't you, is make a decision to lose money on their on their ACA business, not to lose money on their overall business. If you lose money per unit, it is difficult for that to result in making money. Right. I mean, there's the old joke. Yeah, we lost money, but we made it up in volume. Right. I want to be clear that I do not think in general, rates which produce losses on the margin can make up for those losses in volume. It's not realistic to think that a company makes the decision to lose money on its entire business, correct? In the short term, it happens with some regularity, actually. Growing carriers often submit across all of their blocks negative margins. So there's a difference between losing money in the short term and losing money in the long term. Well, would you agree with me that it makes more sense for a carrier in the short term to decide to lose money on its small group and individual ACA business rather than on all its business? That's really a business decision more than an actuarial one. So I'm not sure exactly what value I can provide in response to that question. Okay. Is it fair to say that then you are relying on Blue Cross's representations as to its financial status and its RBC ratio. You haven't yourself evaluated the reasonableness of Blue Cross's representations, correct? I have evaluated it based on those representations. You've evaluated what based on its representation? I have evaluated the CTR based on those representations. Very good. Thank you very much, Mr. Robert. Appreciate your patience. That's all I have. Thank you. All right. I said let's move to board questions. I just want to note that we are not as far along as I was hoping we would be at this point in the day. So if we could keep it concise, that would be much appreciated. So I'll start with board member Lunge. You have questions for Mr. Regeberg? I do not. Board member Holmes? I do not. Board member Pellum? I do not. Board member Walsh? No questions. Mr. Chair? Nor do I. I will. I actually do have one question for you, Mr. Regeberg. There is one thing I wanted to clarify, and then I will turn it over to Laura for a new redirect. And then I do think, well, Mr. Battles, would you like an opportunity to ask additional questions? I understand that Mr. Angoff's questioning went a bit beyond what Ms. Bellaville brought up. No, I don't think I would like to do that at this point, but it would like to have a short recess and then the opportunity to call Mr. Schultz back for the rebuttal. Mr. Regeberg, I did just have one question. Could you please turn to exhibit 30? This was one of the late filed exhibits. Okay. So there's a table for each market with columns for originally filed L&E recommendation and Blue Cross proposed. Do you see that? Yes. And do you see the blue text for medical cost trend from 21 to 23? Yes. What is your understanding of what those numbers assume with respect to hospital budgets? Don't think I have access to precise information there. So based on exhibit 29, Blue Cross indicated that for both blocks, the impact of the hospital budgets, if they were approved as filed, would be about 3.5 or 3.6% relative to the initial filing. So what I can say is that the 2.5% increase here appears to be, or I'm sorry, it's actually, it's 2.8, isn't it? What Blue Cross has filed in exhibit 30 assumes that the board will substantially approve something much higher than it has in past years, but not quite as high as what has been requested by the hospitals. Has Blue Cross provided any analysis to your knowledge supporting their assumptions here? I'm just trying to figure out if there's something that you're analyzing with respect to hospital budget submissions or if there's additional questions that you may need to ask them about that. I'm not actually, I don't believe I have support for this 14.9% on individual and 15.4% on small group. So I might have missed it in the late flurry of documents there at the end, but I don't believe I have that. That's all I had. Ms. Bellovo, do you have any redirect for Mr. Rugerberg? I think that is, you can be excused, Mr. Rugerberg. And now we'll move on to, I believe you wanted to call Paul Schultz back to the stand, Mr. Bells. Sorry, I just took a second to unmute myself. If I could have a five-minute recess before doing that, I'd be grateful for that. I forgot. Thank you. So we will take a five-minute recess and reconvene at two o'clock. Thank you. Mr. Battles, are you ready to proceed? Yes, thank you, Mr. Barber. I would like to recall Mr. Schultz to testify to the virtual stand. Hello. Hello again, Mr. Schultz. Hello again, Mr. Barber. Were you able to listen and just now to Mr. Rugerberg's testimony? I was. And did you hear his testimony specifically regarding Lewis and Alice's disagreement with Blue Cross's assumptions regarding medical utilization trend? I did. And do you agree with his opinion that Blue Cross's assumptions were internally inconsistent or that its methods were flawed in its analysis? No, I don't. So I just want to clarify a few points for the record. I'm first looking at Expinder Exhibit 13, page 10, which Mr. Rugerberg referred to at some length. And I do want to clarify that our COVID adjustment was made only for those services that, by their nature, cannot be deferred, specifically emergency room, urgent care, ambulance, flu, pneumonia. We did not make an adjustment for other services. I just want to make sure that point is clear on the record. Also, I note that Mr. Rugerberg referred to, I believe, three different exhibits and stated that the exhibits were internally inconsistent. And I want to clarify that they are not inconsistent. They, in fact, describe three different measures. So starting again on Exhibit 13, page 10, this exhibit shows the number of services by category for the entire ACA population. This is not an overall PMPM. This is purely focused on number of services. And that's the analysis that we did to support our COVID adjustment, or more to the point, our lack thereof for services other than those that simply cannot be deferred because of their nature. Mr. Rugerberg contrasted that with Exhibit 23, page 12, that shows a positive trend from 2019 to 2021. And I'd like to clarify that this exhibit is not number of services, and it's not for the full population. This is for the matched population only. And I don't think we've gotten into that terminology. It's going to ask if you could just briefly describe what you mean by that. I can. So noting that in the past, some of the trend analysis that we had done may have been influenced by population shifts over time, we landed upon a new methodology that uses what we refer to as a matched population. And in the interest of time, I won't get into the details of exactly how that works. But the end impact of using that matched population is that it completely normalizes for any sort of shifts in the population. Eleni is a pined on that, and they found that that's an effective methodology that's an improvement on the way we used to do our trend analysis. So the clarification I wished to make is that this exhibit is on the matched population, and it is on the full PMPM rather than just the utilization. And finally, I'd like to make the observation that Lewis and Ellis has recommended that a 1.54% trend is a fair characterization of past or underlying medical trend. That's the recommendation in their report. And I will observe that the 1.54% is not what I would call significantly different from the actual two-year trend of 1.77%. So if I were to use this page to calculate our COVID adjustment, I would have reached the same conclusion that I did for the filing that we cannot discern that COVID had a significant or material impact in an upward or a downward direction on actual results. I'm saying that because when what we actually looked at, we saw a 0.8% decrease across all services and concluded that that was not sufficiently material to merit an upward adjustment to rates. So similarly, I can look at the difference between the 1.77% to the 1.54%, which is 0.23%, and conclude that neither is that sufficient evidence to merit a downward adjustment of about a quarter of a point for COVID. So either way, I consistently arrive at the same conclusion that apart from services that cannot by their nature be deferred, COVID had no discernible impact on 2021 experience. And further, based on the information in Attachment A and information we've provided elsewhere in my testimony and in all of the exhibits and the material that went back and forth, I still arrive at the same conclusion that future facility trend in particular is likely to be higher than recent past facility trend, and that an overall medical trend of 2% is indeed reasonable. Thank you, Mr. Schulz. I would like to also draw your attention to a point that Mr. Barber asked about in specifically discussing exhibit 30 and Blue Cross's final proposed rates. And I would just ask you to briefly explain how you arrived at those numbers. Sure. So as I believe I went into a little bit of detail earlier today, we started with the hospital budget submissions. We assumed that the Green Mountain Care Board would decrease those submissions by 1% across the board. And that 1% is aligned with the Green Mountain Care Board action in recent hospital budget cycles. And the final numbers also include some updated final contract information that's become finalized since the time of initial filing. So that hopefully explains why the numbers on exhibit 30 can be seen to be different from the numbers that were on exhibit 29. And I'll clarify, we have not provided support for those numbers to Mr. Ruggeberg just yet. Typically that support is provided after hearing. This is kind of a just-in-time exercise to assimilate all the hospital budget information that only just late last week was fully posted to the board's website. So we, you know, we were able to prepare the exhibit, but we have not yet provided the support to Mr. Ruggeberg and we look forward to doing so after the hearing. Thank you. Is there anything else you'd like to add in response to that testimony that you just heard? No, nothing further. No further questions. Mr. Hangoff, do you have any cross on those issues? I think this has been sufficiently beaten to death. I have no questions. I have no questions. Thank you. If any board member does have a question, speak up. Okay. Thank you, Mr. Schultz. If you could please stick around for executive sessions later this afternoon, please. Of course. And Ms. Bellovo, did you want to take a minute to confer with Helen about whether any additional questions for Mr. Ruggeberg are needed or should we move ahead with Ms. Green? We're all set and please feel free to move ahead. Mr. Battles, are you ready to call Ms. Green to the stand? Yes, I am. Thank you. Good afternoon. Good afternoon, Ms. Green. Could you please raise your right hand? Do you solemnly swear that the evidence you shall give relatives of the cause under consideration shall be the whole truth and nothing but the truth to help you God? I do. Good afternoon, Ms. Green. Could you please state your full name for the record? My name is Ruth Green. And what is your position with Blue Cross and Blue Shield of Vermont? I hold the position of treasurer in CFO. And did you prepare and submit pre-filed testimony in this proceeding? I did. Can you identify where that pre-filed testimony is in the exhibit binder? Yes, my pre-filed testimony is in exhibit 22. Thank you. Was all the testimony contained in exhibit 22 true and correct to the best of your knowledge at the time you filed it? It is. As you sit here today, is all that testimony still truly correct to the best of your knowledge? Yes, it is. Although I would like to update my testimony with regard to how Blue Cross, Bishilor, Vermont's administrative costs compared to other insurers. Certainly. And why do you need to update your testimony on that subject? At the time I filed my pre-filed testimony. Or shortly thereafter, the L&E report came out which had updated information with regard to the how Blue Cross's administrative costs compared to other insurers. And are you referring to the exhibits 17 and 18 which we've discussed throughout the day today? Yes, I am. 17 and 18. Yes. Okay. Would you please turn to exhibit 17 in the binder? I'm there. And is this L&E's actuarial opinion on the individual filing? Yes, it is. And if you would please turn to page 23 and please describe the updated information that you mentioned a moment ago. Yes, on page 23, the top half of that page, as we have already covered a couple of statistics on this page, L&E was able to pull together an updated comparison of our costs to other nationwide Blue Cross plans. And as we noted already in previous testimony, the administrative costs ranked 10th out of 62 plans on a PM, PM basis. And that on a percentage of premium basis, Blue Cross ranks 31st out of 62 plans, which means that on a percentage basis, Blue Cross had lower expenses than half of the other Blue Plans who sold individual and small group business. And as Kevin Rutherford mentioned earlier, they did note in their report on page 23 that we were previously on the low end of the administrative costs for Blue Plans nationally. But as a small state and a small membership base, we have to spread our fixed cost over more, cover more than what other Blue Plans cover. And we did have a shift in 2021 of membership out of one set of our platforms to a different partnership platform, which does have the effect of increasing the ACA PM, PM basis. L&E also reported that they didn't think that having administrative costs at the 85th percentile was unusual given given our size and the number of segments that we cover. And they did conclude that our expense assumptions were reasonable and appropriate. And is this same analysis also in the L&E opinion for the small group filing, which is that exhibit 18? Yes, it is. In your opinion, are Blue Cross's administrative expenses reasonable? Yes, in my opinion, the administrative costs, especially as that relates to the small group and individual plans, are reasonable. In total, Blue Cross has to have staffing and technology to serve all of the segments that we provide coverage for in Vermont. And that requires a certain amount of fixed overhead and support for all of those segments. And we also meaningfully participate in a lot of the health care reform initiatives and provide for some of the innovative programs that Paul had described earlier today. I won't go through all of those, but I would like to note also that the going forward in 2023, our rates also include a couple of new services that Paul mentioned earlier, the credit card flexibility, payment options for members, as well as the Vermont Health Connect billing. And with all of that, our administrative costs as a percent of premium went down in 2023. What percentage of the as-filed individual and small group premium reflects administrative costs? On a combined basis, the as-filed, it was 7.3% of premium, which basically means, as Paul testified earlier, that a small portion of premium just over seven cents goes towards the administrative costs to administer the insurance. And if you could turn to your pre-filed testimony, which is Exhibit 22. And do you explain within there your decision to direct Mr. Schultz to include a non-law 1.5% contribution to reserves and the filed rates? Sure. As I included in my pre-filed testimony and it was part of the rate submission, I instructed Mr. Schultz to file a 1.5 CTR in a memorandum that is dated May 2nd, 2022. And that memorandum, we've taken to submitting that with our rate filing each year to outline our philosophy and settings CTR and our philosophy hasn't changed. We do take a long-term view. We know that there's been a lot of volatility in the business world and the healthcare world over the last several years. And our reserves and surplus has oscillated up and down, but we remain committed to having a long-term assumption for CTR of 1.5% so that we can limit the amount of volatility that might be felt within premium rates. Thank you. And so we've talked a little bit already today about the term RBC or risk-based capital. Just if you could just briefly explain what that means and how it is different from CTR. Okay. Risk-based capital is a measurement of a point in time of an insurance solvency. It compares the level of reserves to the amount of risk that an insurance company has for the coverage that it's written. And so the RBC looks across all of the businesses of Blue Cross and it's a snapshot of the solvency. Whereas a CTR, a contribution to reserve, which we use specifically because we're a non-profit. We don't think of it as a profit margin because it's the minimum necessary to sustain that RBC over time. So the CTR is really just a component within each rate development that we do that ensures that each of our segments is contributing towards that long-term goal. And I know Mr. Ruggerberg testified a little bit about this already but did he and Lewis and Alice review the reasonableness of the 1.5% CTR? They did, if I go back to exhibit 17, I believe it's page 24. Exhibit 17, page 24. They did have a look at the contributions reserve or the risk margin that insurers include and they did say that our 1.5% would place Blue Cross at around the 27th percentile for all QHP carriers. We did talk earlier about in the 442 filings that they looked at that the CTR that showed up most frequently was 0 to 5%. And further down below in 1 to the third paragraph underneath the table on page 24 they talk about L&E does not recommend a change from the base CTR 1.5%. And they did indicate that in the following paragraph that a base CTR of 3% would be in line with typical individual and small group filings nationally. Do you agree that a CTR of 3% here would be reasonable? I can imagine a scenario where a 3% CTR would be reasonable, yes. And why is that? I can think of two reasons. The primary reason is something that we outline every year in our philosophy on CTR and that is if there's a reasonable probability or a reasonable likelihood that our contribution or our RBC would would be tracking to be above the top end of our target range. I'm sorry the other way around. If the trajectory is tracking such that there's a high probability of it falling below the target range we would have to start considering increasing CTR. And the second reason really is because since we made this filing and since I provided that report to all Mr. Schultz the hospital budget request the price increases that the hospitals are requesting have come in since the time of our filing. And one of the things that drives what we call the minimum necessary CTR which has been a long-term assumption of 1.5% is that the medical trend as that goes up every year the 1.5% is designed to sustain RBC. If that medical trend were to accelerate and continue at a much higher rate we would have to increase CTR above 1.5% say to 3% or something you know certainly above 1.5. And so in your opinion would it be would it make sense to decrease the nominal CTR below 1.5%. No under current circumstances it would be improved to decrease CTR below the base CTR below 1.5%. Given your instruction to Mr. Schultz to file a 1.5% nominal CTR and not include COVID related claims in 2022 rates what is your expected outcome for the individual and small group markets with respect to CTR? Yeah that was covered at length in Mr. Robert Bird's testimony but just to state it here we estimate that there will be further direct COVID claims in 2023 and we have for since the pandemic began we have viewed our reserves as the place where the the disruption and the COVID claims would be paid out of but effectively with a nominal 1.5% CTR and our estimated COVID direct COVID claims of about 0.75% the effective CTR that's in premiums is 0.8 or 0.75 depending on which way you like to round. And I believe you stated that you believe that 1.5 is the minimum necessary CTR that you could request and given that it's at the absolute bottom range why don't you direct Mr. Schultz to include a greater CTR? The outlook for RBC is by nature something that is affected by a lot of things beyond our control so as we look at the minimum necessary two reasons I didn't at the time instruct Paul to do something higher than one and a half one is the hospital budgets as I had mentioned we thought that the one and a half was near adequate barely with what we were expecting for hospital rate increases in their budget requests but certainly they came in much higher than what we expected and the other reason is that we you know until there's a reasonable likelihood that we would not be tracking to our target range I would stick I would choose to stick with the long term assumption and let those let those factors play out. Do you please briefly explain what policyholder reserves are and why they're important? Policyholder reserves are what insurance companies are required or mandated by the Department of Financial Regulation to hold to pay claims for our members no matter what those reserves are designed to make sure that we're there to pay the claims you know when when they're incurred and and there are uncertainties that have to be covered and we have lots of examples of where we might draw on those reserves and talked about those in previous rate hearings but clearly the the number one reason is the claims that might come in higher than we projected or maybe there's a state or federal regulation change that is unexpected we had that happen in 2017 when the cost share reductions funding was stopped and that was after the rate the premiums were in the market and we also need to draw reserves from time to time when we're investing in new innovative programs like the ones that Paul shared earlier today whether it's working to find more cost-effective ways to deliver generic drugs to market through Civica RX or the Vermont Blue RX program or any of the other care management and payment programs that we administer and then we also draw on reserves from time to time when we offer new products to new markets and and we have a really good example of that in 2021 we launched the Medicare Advantage product line to Vermonters and that that requires reserves and when also earlier today it was made clear that when we grow membership it will in the short run reduce RBC and it's a form of drawing on the reserves and I know we talked a little bit earlier today about the effect in different areas that growing membership has on on Blue Cross but can you explain just in a little more detail why growing membership draws on reserves? Sure just like losing membership means that the level of risk that we have goes down when we add membership the level of risk goes up so for each member that we add to our roles in each year's enrollment period we are required to hold a certain amount of reserves in order to stay within our our target range and and be solvent in the eyes of the Department of Financial Regulation but when that those new members come on board our surplus doesn't go up immediately we do have the modest one and a half percent CTR but certainly over time that surplus will accumulate and the growth you know the RBC sort of levels out later on but in the short run it will reduce RBC and I'd like to turn to talk a little bit about RBC and specifically whether if you could explain how Blue Cross develops its RBC. Blue Cross's RBC is a ratio it's it's it's basically how our reserves compare to the amount of risk that we have on the books so to speak and the amount of risk is calculated based on the methodology that's required by the National Association Insurance Commissioners and that's mandated by the Department of Financial Regulation. And could you describe the regulatory requirements that the government RBC? Yeah the the Department of Regulation as I mentioned in my pre-file testimony the Department of Regulation issued an order that requires that we target our RBC in the range of 590 to 745 percent. And what is Blue Cross's current RBC ratio? As of the end of 2021 or at December 31st 2021 our RBC was 607. Does DFR monitor that ratio on a regular basis? They do we record it regularly and we also provide DFR with information periodically around the projected RBC. Can you turn to exhibit 19 and you're also going to ask about exhibit 20 in the in the evidence plan? Okay I'm at exhibit 19. Can you just identify what these are for the record? Sure exhibit 19 and 20 are the solvency opinions from the Department of Financial Regulation and exhibit 19 is the individual rate piling and exhibit 20 is for the same opinion for the small group rate piling. Is there any substantive difference between the two others? No it's the same letter for both markets. We'll look at exhibit 19 and if you could please turn to page three. Page three yes yes I'm there. Okay and if you would please read the second and third sentences in the paragraph under impact on solvency of proposed rate. DFR does not expect the proposed rate as filed will have a significant impact on our overall I don't know our overall solvency assessment of Blue Cross Blue Shield of Vermont. Any downward adjustments to the piling's rate components that are not actually supported however will reduce Blue Cross Blue Shield of Vermont surplus and negatively impact its solvency. Do you agree with the commissioner's opinion? I do. On the same page would you please read the paragraph the first paragraph under analysis of solvency. DFR considers insurer solvency to be the most fundamental aspect of consumer protection. Determining an insurer solvency is more complex than whether any given moment the insurer has more assets than liabilities. Rather it is an intricate analysis of many factors to discern how closely insurer is to insolvency now and in what direction it will move in the future. And do you agree with the commissioner's opinion on that point? Yes. Thank you. Are you prepared to provide the additional testimony and answer questions regarding the RBC projections for 2022 and 2023? Yes I am. Is it appropriate to provide that testimony in public session? No it is not. And why not? The financial projections for Blue Cross are confidential commercially sensitive information that provide business advantage for Blue Cross and we make reasonable efforts to protect the confidentiality of that information which is important in a competitive marketplace. Thank you. So I have no further questions for the public session although I'll have some additional questions once we move to executive session. Mr. Angolf do you have questions for the screen? No questions for public session. I do have questions for executive session. Ms. Calvo do you have any questions from the screen? Oh I have no questions. Next we'll go to the board starting with member Holmes. Did you say member Holmes Mike? I did. I did. Can you speak up a little bit louder? It's sometimes a little you talk softly or I can't always quite hear you. No worries. Well thank you Ms. Green. I appreciate your testimony today. My first question is my understanding is that Blue Cross Blue Shield assesses facilities for overall quality and patient safety. These are deemed the designated blue distinction centers and also for both quality and efficiency or cost and those are designated blue distinction center plus facilities. Can you talk a little bit about the methodology used to select hospitals for those designations? Unfortunately that's not my area of expertise at a high level. I do know that there is a rigorous process and in some some aspects that process is also sort of requirements through the blue association so that blue plans throughout the U.S. can have similar assurances when a member visits one of those centers outside of Vermont for example. So there is some consistency around that but I'd be happy to follow up with more detail about that. No that would be fantastic. It would be helpful to understand how those designations are determined. Do you know how many Vermont hospitals have achieved either of those designations and for which services? I don't but I can follow up with that. I do know that it's definitely the services that drive the distinction and the facility has to meet certain criteria for certain services so it's not just a hospital and all of the services. It's very specific so we can certainly follow up on that. That would be wonderful. I did look a little bit on the website and I noticed that there were not a lot of Vermont hospitals listed by services for either of those designations and so it would be really helpful to understand why Vermont hospitals are missing from both of those designations or hospital services I should say, particular services that hospitals are not listed. For the hospitals that have received those designations or for Blue Cross Blue Shield in general, your members, I'm wondering how do you incentivize your members to seek the care at those designated high-quality low-cost facilities? Once they've been designated, does Blue Cross Blue Shield Vermont do anything to encourage its members to seek care at those designated facilities? Again I'm not the right person to know the details of how this works but I do know that we have certain of our clients really like the Blue Distinction aspect especially if they have members who are out of state and certainly our service organization is familiar with the Blue Distinction areas and it can help people find them but we don't have a, to my knowledge and I'll follow up on this to see if it varies perhaps by Blue Distinction service facilities but to my knowledge we don't drive business to them but it is certainly an option for our members. What would you agree that driving members to those low-cost high-quality hospitals would reduce costs to all members and reduce future premiums? Yes, any facility or provider that's considered high quality, lower cost, the more our members use them the more effective and cost effective the coverage would be. Okay, July 1st was actually the deadline for insurance companies to upload machine, readable files related to negotiated prices of health care services. At least that's my understanding. What do you think we will all collectively learn about that data and how can Blue Cross Blue Shield leverage that data and its negotiations to make health care more affordable for providers? Yeah, as we know the other efforts that were mentioned earlier today about providing consistent information about the cost of certain services can often initially create more questions than it answers just because everyone's digesting what's out there. We believe that the machine readable files are really the power in that regulation is through the member-oriented cost transparency tools so that people will know the costs up front and be able to sort of participate more proactively in where they get their care and prevent surprises, etc. So I know that Lou McLaren and some of our contracting folks has talked to the board about what information they were able to glean from the previous round of information but the machine readable files is really designed for providing the data for some of the member-facing tools so that they can navigate the health care system more seamlessly. So do you have plans on then doing anything with those member-facing tools as a result of that data? Yeah, we have a cost transparency capability and I think the team, the technology and the team that works on that is looking at how that can be improved over time with the newer developments in data that's available and frankly the industry of technology firms that are working on different tools is changing constantly so we're looking at certain types of tools for certain types of services and things. Okay, my last question is on exhibit 14 pages five through nine in that in those pages you outline a set of programs in place to reduce low-value care many programs there. Do you assess the return on investment on these programs or in effect do you assess the member savings per dollar per month spent on these programs? Yeah, all of our programs just want to be careful but we don't get into anything confidential in this line of questions about some of the executive sessions. Good point, good point. I think I can safely respond as we have in previous hearings that all of our programs are reviewed on a periodic basis and when a new program comes along it has to compete with you know the resourcing that we have and we'll often be looking at the effectiveness of the programs that are in place and then if a new program is more effective we'll make some trade-offs or in some cases we'll say well we'll add something to it but there is an ongoing review of how our cost containment and quality and low-value care programs are running you know are they are they providing the benefit because things can change too over time so they need to be looked at periodically. Okay I might follow up in the confidential executive session but thank you very much that's all I have. Thank you. Walsh do you have questions from the screen? Board member Walsh do you have questions for Bruce? Member Pelham? Hi. So I have my mics on. I have a just a question I'm trying to get a sense of scale here between so I'm looking at four percent as it relates to administration and one and a half percent as it relates to CPR and I'm wondering what are the two numbers in dollars so if there was a four percent increase in administration what's the dollar value of that and similarly for CTR because my guess is CTR would be bigger than the administration but the percentages are not aligned and I mean I do know from your surf filing that for the small group the premium increases 18.6 million at the 12.12 and a half percent rate increase level and for the individual market it's 19.5 million at the 12.3 percent so I'm just just trying to get a sense of here's the combined it's 38 million dollars and then down the line for administration this is the call on that and down the line for CTR this is the call on that just to kind of have perspective. Sure the one and a half percent CTR I'll take that one first so in each rate filing the total premium charged which is on that same exhibit that not just the increase but the total premium charge the CTR one and a half percent for the small group business is two and a half million two and a half right and then the for the individual it's about the same 2.7 million that's one and a half CTR whereas four percent on admin the well there's a couple ways to look at it we've talked in the past I have handy we've talked in the past of what the impact of a one percent salary increase would be and that is very small in terms of percentage of premium it's less than I think it's one 1.2 percent less than 2.20 of one percent for premiums but I can give you one moment and yeah why don't you tell you I know that the four percent what I hear you saying administrative costs would be around three million give or take three million yeah so you have so you have both salary and then administration right it's all in there yeah right okay well I'll look forward to the detail but this gives does give me a sense of scale here thank you board member lunch thank you um while we're on the topic of administration so in prior years typically you you do mention a three percent salary increase and to be frank I can't remember sort of the general administrative increase year over year but it sounds like that's information that we'll be able to get uh from uh just this previous question um so can you talk a little bit about the basis for the four percent administrative increase your filing indicates inflation can you be more specific sure so um when we submitted the filing and certainly for the first part of 2022 there was um as we all have experienced sort of an increasing rate of inflation which um is really and still remains to be seen how long that sticks around for and certainly the federal reserve had to begin taking pretty significant action to raise interest rates to bring that inflation under control so we we debated whether or not we should be thinking for 2023 as we are just going into our budgeting season now for 2023 we thought our previous assumption of three percent on salaries and zero percent i.e. keep everything else non-salary flat was going to be um a goal or a target that wasn't practical to meet in 2023 given the current inflationary pressures so while at the same time we also believe that the federal reserve will get this under control and um we don't believe that there's a long term risk of um this very high inflation but we felt that it was important for us to plan for salary increases um somewhat higher than what we had between the freeze that we did in 2021 where we froze salary folks salaries at no increase at all and then the labor market heated up and the ability to attract and retain people has become um very much a front and center issue for us so we felt like we needed to be planning for something higher but we also recognize that um we pride ourselves on keeping our cost efficiency in the place where it it helps our customers and our members so we we didn't go above the four percent we just felt like it was premature to go too much higher than that so what is your salary assumption right now we're um the filing includes four percent but we're still working on exactly what it should be we're we're looking at where the retention risks are in our business for some of the more expert resources that we would pay a lot more to replace them so we're we're having a look at where those opportunities to make sure that we're keeping the people that really make blue cross work what's your vacancy rate we had um very low turnover up until this last couple of years when we froze our pension plan we had a number of folks choose that as a catalyst to retire and we've also seen with remote working environment people can live in Vermont and enjoy Vermont and work for companies elsewhere so we've had an uptick in our turnover and um you know I haven't looked at the rate recently but in 2021 I think it was well north of 20 percent we are having trouble hiring folks as well so I do know that we have at any given point in time we have about 20 vacancies on a base of about 400 but that goes up and down depending on the timing okay so the 20 percent was from 2021 yeah no let me um take that back and pull an act through you know not me just remembering from the last report I looked at I'd like to provide you with that information great thank you um and in terms of outside of flat salaries and benefits what are the other types of administrative expenses that inflation would impact and for example I would assume that some of your contracts may be in place and may last for multiple years and wouldn't necessarily rise or fall with inflation but could you give me a sense of what those other costs are sure you're you're absolutely right the other costs are in fact um the contracts that we have for the for instance um aim I'm trying to remember what it stands for but our our our advanced imaging management contract um would be increasing or any of the contracted resources that we use when we need to develop a new capability sometimes we hire in contracted resources for that but yes so all of our we don't I'd say our Microsoft contract for the base like laptop and network is a multi-year contract but beyond that a lot of the other contracts are one year because it usually would work to our favor to not have long-term contracts when inflation wasn't so rampant but we are definitely fighting that same fight that everyone is trying to to keep our vendors rate increases in in check during this time thank you um so going back to um the administrative cost being spread over fewer people you mentioned a few minutes ago part of that is a shift of um some folks from one platform to another is that the Medicare Advantage uh situation that Mr. Schultz had testified to earlier yeah that's one of them we have um we have a couple of different partnership platforms Medicare Advantage is one we also have a tpa that does a blue branded ASO service and whenever membership shifts between the different platforms it means the fixed costs of those platforms have to be shared by the membership that's remaining and in the case of Medicare Advantage we were very successful in 2021 um out of the gate in year one we had one of our large group clients move their retirees onto the platform which was very good from their point of view they were saving lots of money by doing that and so the growth on the Medicare Advantage with the business meant contraction on the the previous core if you will um Blue Cross platform so on the core platform in addition to the QHPs is it the large group members or are there additional books of business in that core platform yeah it's interesting most of our other businesses are on that core platform with the exception of our part D Medicare pharmacy offering but our federal employee program a large group large group ASO QHP I'm sure I'm missing one or two Medicare supplement those are all on the core legacy systems so as we grow those businesses as we said earlier today that pendulum swing and thank you very much that's all I have Mr. Chair you have questions yes um Ruth when do you expect to get an answer from um the federal agency on whether or not you'll be able to uh revert some of the funds that you had had to advance to the pension back to will your reserves yeah so um the real good news is uh we our pension trust has received um a partial settlement from the litigation against alliance and um at your end when the pension valuation happens those uh the benefit of those recoveries will show up in our financial statements the federal um department of labor action that you mentioned is um they need to approve an exemption for an agreement that said that it should we recover those funds will the cash actually come back into Blue Cross's investment portfolio and that's what we're awaiting and it's it's kind of a there I say kind of a fickle process it kind of moves quickly and then we don't hear anything for weeks at a time so we thought we were real close back in March and it's been quiet now but I do expect that to be resolved yet this year but irrespective of that the value of that those assets coming back into the pension trust will benefit Blue Cross in is there any recent news as far as the rest of the actions because that was just a piece yeah the other piece is moving along in a in a positive way um but I we can certainly um talk more about it in executive session but um that other piece is is moving that's all I had Mr. Hearing officer is the battle is any redirect on the public the public stuff uh no but we're ready to move to executive session if everyone else is so um you guys have been through this before with the exception of uh board member Walsh but um there's typically two grounds that arise in these types of proceedings for going into executive session first one the board can go into executive session to take testimony on documents in portions of documents that have been determined to be confidential so all the blue highlighted material in the binder has already been determined to be confidential through through a process under our rules and we have an obligation to keep that material confidential which we can do in an executive session um the caveat there is that that exemption to the open meetings act or sorry that that provision of the executive sec session statute doesn't permit a discussion of the exempt portion of a record to extend to the general topic so for example the unit cost assumptions in the filing that have been determined to be confidential doesn't wouldn't permit you to go into uh to discuss contracting in general in the executive session there is a separate section of the executive session statute that uh allows you to go into executive session to talk about um contracts provided that you found uh that public knowledge of the information discussed would place a person at a substantial disadvantage so I've heard throughout the day that both of those grounds may be at play so sounds like people have questions about the confidential material in the binders which would include the RBC projections um maybe some unit cost information I've also heard uh what I think there may be questions about provider contracting uh expectations in general and so I think to to cover both of those grounds you need to uh kind of include both of those grounds in the motion um so any questions about that I can propose some motion language if you'd like and then you can ask me questions about that um uh but it so would anyone like to move that the board find that public knowledge of uh the details of Blue Cross's provider contract negotiations would place Blue Cross at a disadvantage substantial disadvantage I will move that the board find the public knowledge of the details of Blue Cross's provider contract negotiations would place Blue Cross at a substantial disadvantage there a second to that motion I will second it all those in favor please signify by saying aye aye hi hi thank you please let the record reflect that was unanimous um and then the second motion I'm suggesting is uh would you like to make a motion to go into executive session to take testimony about the details of contract negotiations between Blue Cross and healthcare providers and um material in the binders that's been marked as confidential I would like to move we go into executive session to take testimony about the details of contract negotiations between Blue Cross and healthcare providers and to discuss uh information that's been marked confidential in the exhibits and binders second okay been moved and seconded all those in favor please signal by by saying aye aye all right let the record reflect that was unanimous as well um so before we go into executive session um I just want to caution the attorneys and the board that this needs to be limited to those topics that were identified um and that uh any anything outside of that will need to be um in the public session um as far as uh who comes to the executive session so um it would need to be obviously the board members the attorneys uh Miss Green and Mr. Schultz I think we identified um I think L&E needs to be there as well as uh DFR uh since we were really talking about the RBC I think it would be helpful if they were there to hear that um any anyone that I'm not that I missed that should be in the executive session thank you we would ask that uh Martine uh be allowed to participate as well yeah yeah I'm thinking everyone from and Rebecca and I believe Greg is on the line too so I guess you know our legal and actuarial team we would like to be able to listen anyone from Blue Cross anyone from the healthcare advocate um board included L&E DFR uh and obviously the court reporter um Mr. Lee is it possible to transcribe the executive session uh separately yeah I believe so I'd be appreciated anything that I'm not that I'm forgetting here before we move into the executive session do we need to make an estimate of time for how long we will be in executive session for folks yeah that would be helpful um so I heard uh Ben has some direct for Mrs. Green and you all have some cross on that for Mrs. Green and then I think there was some cross left over for Mr. Schultz so I'm expecting 30 to 45 minutes is that does that sound like I have probably five or six questions that could be as much as I don't know 20 minutes so maybe an hour because I know Jess also asked a question that got deferred to executive session and I don't know if other folks have questions so I know that uh you know people will want the opportunity for closing statements Mike but I was just wondering if it made any sense at all to have um DFR test by an open session before we go into uh private session um I think it I'd like to hear the party's thoughts on this but uh I I they're giving an opinion about the impact on on solvency and I think potentially uh questions around the RBC projections and and stuff might be relevant so that's why I'd prefer to keep the order as as it is okay happy to defer to however you'd like to receive I'll say we Christine if you could post a on on this channel and notice that we are in executive session we expect to come back uh at four and we'll try and make that happen okay I think we're all here uh we're back on record in the Blue Cross and Blue Shield of Ramon's 2023 individual small group rape filing hearing we've just come out of an executive session to talk about um confidential materials and the binders and I think we're ready to move on to testimony from the Department of Financial Regulation um so Jesse Lucia I see you're with us are you prepared to take the oath yes can you hear me okay yes we can hear you great could you please raise your right hand do you solemnly swear that the evidence you shall give relative to the cause under consideration shall be the whole truth and nothing but the truth so help you God I do then uh proceed as in past years all right um my name is Jesse Lucia I work for the Vermont Department of Financial Regulation I've been there for 11 years uh I'm the lead analyst for Blue Cross Blue Shield of Vermont um during the course of an analysis uh it involves reviewing quarterly financial statements and then year-end there's a there's a very robust financial package that includes financial statements audited financial statements various exhibits actuarial opinions that we use to incorporate our full solvency opinion um I'm going to just read parts of the solvency opinion that we issued for the individual rape filing um um as you can see we've included the the RBC ratio over the last five years and the company surplus uh both of which have increased since the previous years and uh as we've noted Blue Cross uh their RBC ratio is now uh within the range um although it is at the the bottom end of the range and as we've discussed before uh Blue Cross expects the RBC ratio to stay kind of kind of close to the to the bottom for the next year or two um I'm just going to go straight down to the impact on the solvency of the proposed rate section on the bottom of page three and read that for everybody dfr does not expect the proposed rate as filed will have a significant impact on our overall solvency assessment of Blue Cross Blue Shield of Vermont any downward adjustments to the filings rape components that are not actually supported however will reduce Blue Cross Blue Shield of Vermont's surplus and negatively impact solvency um the first sentence notes that the individual filing rate was 12.3 percent the small group filing reads the same except that it notes it's 12.5 percent of an average rate increase um I know we've discussed this before that Blue Cross has updated their filing which is noted in exhibit 30 and those rates are 14.9 percent and 15.4 percent um I don't believe that our opinion will change with those updated numbers with the caveat that Lewis and Ellis the the care board's actuary reviews the the amendments or the updates and opines that they are are reasonable um and with that because I know we're kind of sure on time I will uh turn it back over to you Mike thanks Mr. Lucia uh Mr. Battles do you have questions for dfr I don't have questions thank you Mr. Lucia Mr. Angoff do you have questions if I can't hear you you're on mute if Ben doesn't have questions I don't have questions does any board member have questions for Mr. Lucia okay thank you Mr. Lucia thank you okay next on the agenda is Mike Fisher here I am are you ready Mr. Fisher I am okay could you please raise your right hand we find my oath not used to giving it uh do you solemnly swear that the evidence you shall give relative to the cause under consideration shall be the whole truth and nothing but the truth so help you God yes go ahead um so thank you uh for listening to me at the end of the day at the end of this long day it's been great spending the day with you all let's do it again in two days um and uh and thank you board members for your thoughtful consideration of the really difficult decisions in front of you thank you in advance um I was heartened by this year's public comments to me they represented a higher quality than I think we've seen in previous years I was impressed by their overall level of understanding of the complexity and their thoughtfulness and and their reasonableness I know that that board members take pride in reading all the materials in front of you and the public comments um but I want to take a moment to highlight some themes that I saw this year um and read it and read excerpt excerpts from a few comments um many people this year talked about this proposed rate increase in the context of overall inflation one person said I understand that healthcare costs are rising they were rising even before the pandemic what concerns me is that every company and institution in the chain is allowed to protect their profits and to pass their costs on to individuals who are already overburdened by the rising costs of living another person said a double digit price increase will be devastating families already struggling to buy food and put gas in their vehicles to get to work will make the painful choice to drop their insurance what a few Vermonters commented about the proposed rate increase in the context of availability of care when I do need to see a doctor it's months before I can get an appointment I've been on wait lists for mental health for almost a year the person went on to wonder an increase of 12% would be such a serious serious would be would have a seriously considering if it's even worth having health insurance anymore it truly doesn't feel worth it by the way that reminds me um many Vermonters most Vermonters commented about the originally proposed rates not the increase rates they didn't have an opportunity to so I don't know exactly how we reflect that but many Vermonters talked about this in the dynamic of their employer from the small business perspective I can't afford it as a small business owner an employer of seven we will be forced to reduce the benefits and employee contributions will be higher from the municipal perspective an increase of 12 to 15% would be hugely damaging to both our municipal government finance as well as our small rural elementary school and its employees and from the nonprofit perspective people who work for nonprofits are paid low wages and Vermont wages do not keep up with the cost of living with with the cost of living increasing at this rate this will create financial hardships for so many people and one more on this my family of three includes a toddler with a rare condition who has upwards of 50 medical appointments per year that's before anything goes wrong we rely on our high quality plan with blue cross blue shield to make their ongoing care possible and need low deductible plan purchasing my insurance through a nonprofit employer who would not be able to absorb the increased costs uh quite a few people commented about the proposed rates with reference to their pay not going up I think I won't read any comments about that I think people know it we heard comments today we hear comments this year about from caregivers who who talked about what this rate will do to their ability to provide care potentially exacerbating the challenges of finding care mental health care and others and finally there are many commenters this year expressed what I think was a higher level of desperation I'm a semi-retired educator laid off from my full time job of many years in 2021 I depend depend on my blue cross blue shield of Vermont insurance for chronic for a chronic condition a rate increase of any amount would leave me unable to afford insurance simply put I must have insurance giving my given my metal condition yet would be unable to pay any more than I pay now and another person said please don't do this don't raise my rate 12.3 percent just because well everybody else is doing it very soon I will have to decide what to cut out cut out of my budget if I have to cut our health insurance our health care insurance and if I end up in the hospital and can't pay their bill who will pay for it for me please balance your rate hike so I can have the dignity dignity of paying my own bills so Vermonters are telling us just as clearly as they can that the proposed rates are out of range for them that if they go into effect they will have very tough decisions in the context of overall inflationary challenges on their families the difficulties of getting care due to availability of appointments the dynamics facing their employers their experiences of stagnation of real wages and their feelings of desperation and at the HCA we talked to enough people who have very significant health care needs in their family but who just can't pay the premiums let alone their cost sharing for them all of the choices are unaffordable by any definition the initially proposed rates for a family of four purchasing a standard silver just above 400 percent of the federal poverty level according to current law would be expected to pay over 25 percent of their income for premiums a quarter that's before any cost sharing I'm reminded of a concept that that for a number of years ago that an actually sound insurance rate that only Bill Gates and Warren Buffett could afford is not the goal here I'm scratching the back of my brain a little bit but I get a little flash of Cliff Peterson for those who have been around this business for a long time saying that in the discussion about our current structure so the board has options I know you can't satisfy everyone but we believe that you can land on a rate that is not excessive inadequate or unfairly discrimination it's discriminatory but is more affordable for Vermonters thank you thank you for your time Mr Fisher Mr Battles do you have any questions Mr Fisher on that uh no I don't have any questions for us does any board member have any questions for Mr Fisher okay well I think that concludes the witness testimony for today give uh both parties an opportunity for brief closing statements Mr Battles would like to make closing statements yes thank you Mr Barber and I will keep it short because I know it's been a long day I'd just like to close out by emphasizing a few points that have been discussed and first and foremost uh that's what I started out talking about and a little return to now is is the the cost of health care is it is expensive and it's getting more so in the short term and there's there's no getting around that fact the rates we are requesting today are directly attributable to that cost more than 90 of the premiums we are requesting will go toward the cost of paying for health care for Vermonters and as long as those costs are increasing the cost of coverage is increasing as well Mr Fisher just read some you know very moving comments from members of the public and they clearly reflect the difficulty of the current situation I think they also reflect the inherent tension of this process and of the the board's job here too where you have you know concerns about costs certainly also have concerns about access and quality of care for people with special needs and that's uh and that's the tension in this process you know we a number of witnesses have talked about it and the board is well aware of it and and you know that's you know Blue Cross has tried to address that tension as well and propose rates that uh they believe uh strike the appropriate balance and I talked about the 90 percent of of the cost of the premiums which go to direct health care costs and the remaining nine or ten percent uh go to taxes and fees and the cost of insurance uh taxes and fees are what they are and and there's nothing that uh is going to be changed about that and this proceeding um Blue Cross does have discretion and the board does as well over the administrative expensive and the contributions to reserves you've heard today from Mr Schultz and Ms Green how we have allocated those uh the revenue to those costs uh and the important purposes that we put that money toward including our efforts to to reform and improve the health care system to pay pandemic related costs and to protect our solvency as we are legally required to do and you have heard how both Alan and uh and the Department of Financial Regulation agree that our allocation of of those costs of insurance uh are reasonable uh finally I'd just like to emphasize today that the areas of agreement uh really outweigh the areas of disagreement um there's no real dispute that the the rate requests today are being driven by health care costs um the board's actuaries that Alan agree have agreed with with majority of the rate development work performed by Mr Schultz and his team and DFR agrees that Blue Cross must protect its solvency and that the requested rates do so and that any decrease from the requested rates would place that solvency at risk uh and in the small area of actuarial disagreement that we that we have with Lewis and Alice we have explained our methodology and assumptions and why they are reasonable uh and our responses to Alan's questions in Mr Schultz's pre-final testimony and his live testimony here today and you stand by our work and on that score um but and although we spend a lot of time discussing that that one point of disagreement it is a relatively small part of the overall picture and it should not overshadow the other areas of agreement that uh that I've highlighted Blue Cross's final requested rates for the 2023 individual and small markets small group markets are reasonable and they are actuarially supported they strike the best available balance between affordability promoting quality care and access to care and protecting insurer solvency there's that clear request that they be approved uh on behalf of Blue Cross I want to thank everyone in the room today for their time and for your work throughout the process of course including the board and its team and everyone from the healthcare advocate and Mr Lusher uh from DFR and and the members of public who took the time to provide uh public comments and listen into the hearing today thank you for and would you like to make closing statements yes I would thank you Mr Herring officer and thank you Mr Chair and board members four points is that they've got a duty to their policy holders to do that if they don't what value do they bring if you're just going to go to set the hospital rate and and they don't negotiate with the hospitals and the people have to pay it Blue Cross is simply serving the function of an old-fashioned uh pass-through mechanism and I thought that I thought that we got beyond that that I mean both the carriers and the hospitals are going to kill the golden goose the rate for the silver plan is already without any increase today is already almost 800 bucks and that's not for a tremendously generous plan that's for a 70 percent actuarial value plan almost 800 bucks a month I think Mike Fisher said that was 25 25 percent of I forget what statistic to use but it's uh to their credit neither Blue Cross nor L&E said they were pining on on affordability and they shouldn't that's the board's job so my first point is that they just Blue Cross has got to be more than a pass-through mechanism and by reducing the rate the board would be not just doing the public a favor but also be doing Blue Cross a favor in negotiating with the hospitals because Blue Cross would be able to go to the hospital and say listen we got no choice and so uh if if the board were to reduce the rate that would benefit Blue Cross the hospitals and the public second point I was also struck by Ms. Green's admission that for other types of business Blue Cross does not tack on a 1.5 percent CTR for their MA business the America Advantage business it's 1 percent for Blue Cross and for the ASO the large group ASO business not only is there no CTR no positive CTR CTR provision but there's a negative CTR provision so it just seems perverse that they're charging individuals in small groups this extra 1.5 percent and they're not charging other types of business that 1.5 percent I'm going to stick skip my third point and go right to my last point which is good news and the good news is this the board has the ability to change things as I said not very eloquently in my opening excessive inadequate and unfairly discriminatory is just one of many standards in the statute you have to work with and it's an almost unique statute in the country in most states that is the standard and people argue about whether the rates unfair whether the rate meets that standard and it's set based on that standard but here it's different what the board what I'm urging the board to do and I think the board can do it this year and certainly do it in the future is ask L&E not to replicate essentially you know go through the filing and come up with their own actuarial point estimate and by the way what what when Mr. Battles says that Blue Cross and L&E have agreed on most things well they have it what what what L&E has agreed on the standard that L&E uses is not whether Blue Cross has come to the the best estimate of what excessive inadequate and unfairly discriminatory rate is but simply is it a reasonable estimate and sometimes the only time on occasion they find it's not even reasonable it's not even within that zone of reasonableness but if the board were simply to ask L&E give us a range for all these elements and then the board as to what's within the not excessive not inadequate range and then the board has the authority to say based on the other criteria for example what's affordable here is the number we're going to pick within that range that is how the statute can that that's the only way for the statute to make sense and interpreted in that way I think the board would be do it a great service I also think Vermont would set an example for the rest of the country by carrying out the statute to our duty that way thank you again I appreciate everybody's patience with my occasional long windedness so thank you very much thank you Mr. Rangov so I think we are done with the hearing portion of today and need to move to public comment if there is any so if is there any member of the public who's with us who would like to comment on the hearing or the filings or anything you are on teams if you just want to take yourself off mute and provide your comment don't see anyone other than the parties on the attendee list let's just remind everybody about the official public hearing yep I just want to check Christina is there anyone at the board's large conference room no no one is here at the office okay so if there is anyone on like I said at the beginning of the hearing today we will be having a public comment forum hearing this Thursday from four o'clock to six o'clock details about how to attend that and and participate can be found on our website by going to the rate review tab and obviously you can continue submitting comments and writing to the board through this Thursday on on this filing and the filing from MVP so I think there's just one or two minor things probably want to touch base on before we wrap up today I heard a number of questions that there were follow-up on that was needed so we will work over the next day or two to compile those and get them out to you in writing it sounded like there was also maybe a question to be asked around the hospital budget assumptions and calculations and potentially a notice of facts a judicially noticed facts that should all be coming in the next couple days or is potentially coming in the next couple days any questions about that or anything that we need to talk about with respect to those issues now the only thing I just wanted to mention in our pre-hearing conference the issue of a of the page limit for a post-training memorandum came up and I just want to note that so you promise to be prompt about that I'll confer with the client group and make their requests within next day or two if there is a okay anything from the HCA's perspective no thank you very much okay thank you for your attention today and I'll turn it back over to you Mr. Chair thank you Mike and thank you for getting through a long day as always an outstanding job as hearing officer is there a motion to adjourn so moved second it's been moved in second to adjourn all those in favor please signify by saying aye and you oppose signify by saying nay thank you everyone have a great rest of the day