 for Blue Cross Blue Shield in both the individual and small group market. And at this point, I'm gonna name Michael Barber as the hearing officer for today's proceeding and turn the meeting over to Mike. Mike. Thank you, Mr. Chair. Good morning, everyone. As you heard, I'll be serving as the hearing officer for today's hearing. The purpose of the hearing as the chair said is to take evidence and argument on Blue Cross and Blue Shield of Vermont's 2022 individual and small group rate filings. The docket numbers for these cases are GMCB-005-21RR and GMCB-006-21RR. Representing Blue Cross today are Michael D'Onofrio and Bridget Acie, representing the Office of the Health Care Advocate are Jay Angoff, Kylie Kuiper and Eric Schulteis. I also wanna recognize the board's attorney, Laura Belevo, who will be conducting the direct examination of the board's contract actuaries as well as, actually, I'm not sure if he's on yet. Because we're holding this meeting remotely before I go any further, I want to make sure that everyone who will be participating can hear and be heard. So I'm just gonna go around and call on people. And when I call your name, if you could please just take yourself off of mute and confirm that you can hear okay. So Mr. Chair. Crystal Clear. Board Member Holmes. Yes, I can hear. Board Member Lunge. Yes. Board Member Youssefer. Yes. Board Member Pelham. Yes. Ms. Belevo. Yes. Ms. Acie. Yes, I can hear it, thanks. Mr. D'Onofrio. Yes, thank you. Mr. Angoff. I can hear, I hope everyone can hear me. Dan. Ms. Kuiper. Yes, thank you. Mr. Schulteis. Yes, thank you. And Ms. Sears. Yes, court reporters here. Great. So we are recording today's proceedings. We also have a court reporter here, Kim Sears, to transcribe the proceedings and we will be providing the parties with a copy of the transcript as soon as we receive it. It looks like we have 38 people attending this morning via teams. Because we are holding this meeting remotely, we also designated the board's offices in Montpelier as a physical location where members of the public can go to hear and participate. For members of the public who are present, we will be taking public comment at the close of the proceedings today. I can't say when that will be, not for a long time, for sure. I think someone's, oh, yep, never mind. So if you do not want to sit through hours of testimony to provide a public comment later today, we will have a meeting tomorrow afternoon from four o'clock to six o'clock that is dedicated exclusively to hearing from the public on these filings and the individual and small group filings from MVP. Information about that meeting can be found by going to the Green Mountain Care Board's website and clicking on the rate review link. And additionally, you can submit written comments to the board via our website or by regular mail or by emailing Christina McLaughlin at the board. Before we begin, I just want to remind the parties and the board members to exercise caution with respect to information in the exhibit binders that's been marked as confidential as these matters can't be discussed in a public setting. If it becomes necessary to discuss these confidential materials, we will need to go into an executive session and we have a separate phone line for that purpose if we need it. Generally speaking, the confidential material is marked in the binders with either highlighting or unexecuted marked redactions. So moving to the binders, we received exhibit binders on July 15th with 26 exhibits. As I understand it, all of those exhibits were stipulated to with the exception of two healthcare advocate exhibits, exhibit 24 and 25. And then on July 20th, we received three additional exhibits, 27 through 29, which I understand have also been stipulated to. Before we go any further, does anyone not have all 29 of these exhibits? Great. So at this time, I assume neither party objects to me admitting all of these exhibits, again with the exception of 24 and 25 into evidence. Is that correct? No objection. Mr. Angoff. Jay, you're on mute. Sorry, no objection from the HCA. Thank you. Then I will admit the exhibits with the exception of exhibit 24 and 25 into evidence at this time. And I believe we are going to deal with exhibits 24 and 25 during testimony, I assume, across. Is that right, Mr. Angoff? I believe that's what we agreed to at the pre-hearing conference in this matter. Okay. Is there anything that we need to discuss before we move to opening statements then? Michael, this is Tom. You're coming in a little bit choppy every now and then. So if I turn my camera off, we have found that that improves the voice. But so if I disappear, it's because it's coming in choppy. If that's what it takes to have you here, that that's the important thing. Okay, then let's move to opening statements. Either Mr. Donafrio or Ms. AC, do you wanna proceed? Yes, thank you. Good morning, my name is Bridget AC and I, along with Mr. Donafrio, represent Blue Cross Blue Shield of Vermont in this matter. Good morning, Chair Mullen and members of the board. The past year and a half has been a challenging and difficult time marked by uncertainty, anxiety and change. Throughout this period, Blue Cross has played a stabilizing role in Vermont's healthcare system. We helped providers stay solvent with cash advances. We offered payment flexibility to keep people insured and we adapted our policies and programs to make sure our members could access care throughout the pandemic. We approached the pandemic the same way we approach our everyday work by focusing on our commitment to Vermont and to our role as a partner with regulators and healthcare providers pursuing a common objective, bringing high quality, affordable healthcare to Vermonters. Our rate requests in these markets this year reflects that same commitment. We have worked hard to bring the board and our members rate requests that are affordable and actuarially supported. If the individual and small group markets are considered together as they were in past years, our request is for an overall rate decrease of 1%. I want to emphasize some of the key points that you will hear from our witnesses today, Paul Schultz, Ruth Green and Dr. Kate McIntosh about the rates we are requesting for 2022. First, we worked in partnership with the healthcare advocate and successfully advocating for unmerging the markets to make sure Vermonters will see the full benefit of the increased subsidies available under the American Rescue Plan Act. The small group market will see a significant decrease in their rates, averaging 6.2%. The business community has welcomed this news as evidenced by the Chamber of Commerce's letter asking the board to approve our rates. Further, if the board approves the rates in this market as recommended by Lewis and Ellis, the average net premium paid by Blue Cross members in the individual market will also decrease. Mr. Schultz will explain the details, but the bottom line is this is very good news for Vermonters, especially for those whose incomes before ARPA put them at or near the subsidy cliff. Approving the filed rates with the modifications recommended by Lewis and Ellis is the best way to promote affordability. Second, our rate request is the product of our continued efforts to promote cost-effective, high quality care. As Mr. Schultz will also explain, Blue Cross has shared the board's concern about the rising cost of pharmaceuticals. Building on our longstanding efforts in this area, this month we launched our innovative BlueRX program in partnership with a new pharmacy benefit manager. The anticipated savings reduced the file rates by 5.6%. Further, as both Ms. Green and Mr. Schultz will explain, Blue Cross has taken two other steps that directly benefit rate payers in this market and will be funded out of reserves. We have changed the way we allocate administrative costs in a way that reduces the amount for the individual and small group markets and thus reduces rates. In the short term, this change will draw on our reserves. We will also fund COVID costs for 2022 out of reserves. We expect to spend 11.9 million from reserves to cover COVID testing, treatment, and the change in administrative cost allocation. The healthcare advocate may point to Blue Cross's gains in this market last year to argue that the board should cut Blue Cross's contribution to reserves or otherwise reduce the rates in a way that neither actuary supports. However, our filed rates already account for last year's gains. We are using 11.9 million from reserves for the direct benefit of rate payers in these markets. We kept our CTR target at 1.5% our long-term target, even though at that level we do not expect to recognize gains in these markets in 2022. We have done our part and we respectfully ask that the board recognize that in its review of the proposed rates. Mr. Schultz will also explain why cutting our CTR in the individual market would primarily benefit the federal government by reducing subsidies and would potentially make insurance more expensive for low-income Vermonters. Cutting CTR does not promote affordability, but it does draw down our reserves, reserves that should be used for the benefit of our members. The third point I want to emphasize and the point where I will end is that there are simply no significant disputes here. The board has heard from three actuaries, ours, the boards and DFRs. The proposed rates are actuarily supported and our modest CTR request is wholly appropriate given our solvency position and considered in light of the filed CTR for comparable insurers. We appreciate the fact that the healthcare advocate has focused its outreach this year on assisting more Vermonters to sign up for insurance in light of the ARPA subsidy and eligibility enhancements. We share that objective and we hope to expand and increase our market share. But as Ms. Green will explain, we cannot grow without adequate reserves to protect against risk. Again, the proposed rates combined with ARPA's increased subsidies add up to good news for Vermont consumers. That is the most important message we can convey today. We urge the board to approve our requested rates with the minor modifications suggested by Lewis and Ellis and our proposed adjustment reflecting hospital budget submissions. Thank you. Thank you, Ms. Aces. Mr. Angof. Yeah, good morning, Mr. Hearing Officer and board members. Since Monday, I've been struggling with the best way to think about and talk about 2020. And what I've come up with is this. The carriers, in this case, Blue Cross, the carriers are trying to have it both ways. On the one hand, there's no question that 2020 was a unique year. 2020 was a year in which the carriers paid out much less than they had projected. And it's not fair to the carriers to have that as the baseline for all future rate increases because it was so low. On the other hand, it's also not fair to the public, to the insurers, to allow the carriers to keep all the money that they have received because the board approved rates based on their representations, their projections as to what would be the case in 2020. Now, on Monday, I pointed out I believe it is the second most important document in both proceedings and that second most important page. And that is the page from the state health care exhibit, exhibit 15 in this proceedings, which showed what the loss ratios are on individual and small group business. You may remember that MVP's loss ratio in New York was 105, that is, they paid out $1.05 for each dollar they took in. In Vermont, in the individual market, it was 89. They paid out 89 cents for each dollar they took in. Blue Cross on the individual market in 2020 paid out 82 cents for each dollar they took in. So I said, that's the second most important page of the rate filing, which I pointed out. And I'm a little embarrassed that I did not point out the most important page of the rate filing. But member Youssefer did. And that is page 10 of the rate filing, which shows not in loss ratio terms, not in insurance terms, but in simple terms that a business person would understand, which is how much money did the carriers make last year in 2020 rather in the individual and small group markets? And what it shows there on exhibit 15 page 10 line 11 is that in the individual market in 2020, you remember MVP made $2 million in Vermont, lost a bunch of money in New York, but MVP made $2 million in Vermont. Blue Cross made more than $14 million in Vermont in the individual market. In the small group market, Blue Cross made about $11 million in Vermont. So the total that Blue Cross made in 2020 in the ACA market, the individual and small group market was $25 million. That's not bad for a nonprofit company. And if you go to the page before that page nine and you just look at the premiums earn line through the arithmetic, that results in a rate of return on premium of more than 8% for Blue Cross for 2020. Which again, is not bad for a nonprofit company. So I just ask that the board keep those numbers in mind in listening to the testimony in this proceeding. I believe I haven't gone through and looked at every single year of Blue Cross's financials, but I believe Blue Cross ironically in the worst year for many of us in history, Blue Cross had its best year in history. And I just think that they ought to share some of that, not all of it, but they ought to share some of it with Vermonters. Now I'll make one more point, which is this. You remember last year, there was a lot of discussion about what Blue Cross's RBC ratio would be at the end of 2021. And Blue Cross did these projections, which showed, they said the most plausible range, they did five different assumptions. The most plausible range of their RBC ratio at the end of 2021 would be between 435 and 523. Now I know that the RBC ratio the current RBC ratio is non-public, so I'm not going to talk about this in opening statement. And I assume that we'll want to go into closed session to discuss the RBC ratio. And I've got several questions about it, but just to suffice it to say, Blue Cross's RBC ratio is not today between the 435 and 523 that they told the board it would be last year. So thank you, Mr. Haringer officer and board members. And I look forward to the testimony. Thank you. Just so everyone, I think I've informed the board members about this, but just to remind you, we're going to do the order of testimony a little bit differently this year. So it's going to be Paula Schultz, followed by Jackie Lee. So Brigitte or Mike, please call your first witness. Thank you, Mr. Barber. I'd like to call Paul Schultz on behalf of Blue Cross Shield of Vermont. And just for identification for the record, I am Mike D'Onofrio, also representing Blue Cross. Is everybody ready? I'm just, I'm just going to go ahead and give you a little bit of a little bit of a quick Is everybody ready? We just swear in Mr. Schultz. Of course. Mr. Schultz, could you please raise your right hand? Can you swear or affirm that the testimony you're about to give will be the truth, the whole truth and nothing but the truth? I do. Go ahead, Mr. D'Onofrio. Thank you. Paul, can you hear me? Yes, I can. Can you hear me, Mike? I can, thank you. Please state your name and employment for the record. My name is Paul Schultz. I am Chief Actuary at Blue Cross, Blue Shield of Vermont. Did you prepare and submit pre-filed testimony in this proceeding? Yes, I did. And would you please identify that testimony by exhibit number in the binder? Yes, my July 6 pre-filed testimony can be found at exhibit 18. And my supplemental pre-filed testimony as of July 12th can be found at exhibit 21. Was all of the testimony contained in those two exhibits accurate and true to the best of your knowledge? Yes. And as you sit here today, has anything occurred between now and the submission of that testimony that would change that? No. I'd like to ask you a few questions quickly about the filing. Were you responsible for preparing Blue Cross's 2022 individual and small group rape filings, which are the subject of this proceeding? Yes, the filings were prepared under my supervision and I am familiar with all aspects of the filings and the underwriting and the underlying rate development. And did you certify the filings? Yes, I did. At the time of filing, I certify that they met actuarial standards of practice and that they complied with all applicable state and federal laws and regulations. And that certification still holds true today. And were you responsible for preparing all of the information and responses that Blue Cross has provided to the various inquiries from Lewis and Ellis, the board's actuary throughout this proceeding? Yes, that information as well was prepared under my supervision and I am fully familiar with its contents. And same question with respect to the questions that were posed by the board itself and by the healthcare actuary through the board, were you responsible for preparing all of that information as well? I was not directly responsible, but I am familiar with those items and I'm prepared to speak in depth on some of the topics that they contain. Okay, would you please summarize the proposed rates reflected in this year's filings? Yes, as filed, Blue Cross requested a rate decrease of 0.9% on a combined basis. That consisted of a decrease of 7.8% for the small group market and an increase in gross premiums in the individual market of 7.9%. Could you just explain the term gross premiums? Sure, gross premiums are synonymous with filed rates. And how does the term gross premiums interact with approved rates as opposed to filed rates? So once rates become approved, those will be the gross premiums. So as filed gross premiums matched our filing, ultimately what non-subsidized rate payers pay will be based, of course, on approved premiums. Thank you. Please summarize the key drivers that resulted in the rates proposed in these filings. Sure. Especially pharmaceuticals once again are exerting a strong upward impact on rates. In this year, they accounted for about 4.2% of upward impact on rates. That's inclusive of 0.6% for a life changing therapy for one member. Especially pharmaceuticals are life saving drugs in many cases or life altering drugs. And in many cases, they improve long-term affordability, but they are very expensive. And in the absence of state or federal legislation that would curtail the cost of these drugs, we must include those high costs in rates. This is an instance where we are preferring access to care and prioritizing access to care over affordability. There were two significant events that have led to decreases in rates and are leading to the historic decrease in premiums that we filed this year. First of all, as Ms. A.C. mentioned, Blue Cross has long shared the board's concern with the ever rising cost of pharmaceuticals. The latest in a long series of actions we've taken to attempt to curtail those costs was the launch earlier this month of Vermont Blue RX in partnership with the new Pharmacy Benefit Manager. Those efforts reduced premiums by about 5.6%, which it's about $15 million based on current enrollment. Secondly, we noted a significant shift in morbidity from the 2019 to the 2020 population. When we compare those populations, we can see even after adjusting for the pandemic, the 2020 population used far fewer medical services than did the 2019 population. That was offset partially by the fact that the 2020 population much more heavily utilized prescription drugs. On a net basis and in conjunction with a favorable risk adjustment settlement, morbidity improvements from 2019 to 2020 decreased premiums by a further 4.6%. And are you able to quantify that 4.6% in dollars approximately? I don't have that in dollars since 5.6% is worth $15 million on today's membership. 4.6% should be worth in the neighborhood of $13 million. Thank you. Mr. Schultz, have you had a chance to review Lewis and Ellis' analysis of the filing, which is exhibit 16 in the binder? Yes. Could I direct you to page 23 of that exhibit? Yes, turning there and I have it. Do you see the recommendations made by Lewis and Ellis on that page? I do. Does your supplemental pre-filed testimony, which is exhibit 21, you don't need to turn to it. Does your pre-filed testimony regarding these recommendations still accurately reflect Blue Cross's position with respect to these items? Yes, it does. And what is Blue Cross's position with respect to each of these recommendations? We agree that all of these recommendations should be made. The changes should be made. Thank you. Take a look at the first one, the first recommendation and just read that into the record so everybody, we're sure everybody's on the same page. If updated information regarding unit cost trends are known at the time of the board order, L&D recommends updating the assumed unit cost trends in the 2022 premium rate calculations. The impact of such a change cannot be estimated at this time. And again, Blue Cross agrees with that recommendation, correct? Yes, we do. And have you used the updated hospital budget information to revise anything about the proposed rates in light of that recommendation? We have, and that is, I believe, exhibit 29. Thank you. So that work is summarized in exhibit 29, correct? That's correct. And can you just explain what you did as reflected in exhibit 29? How you performed this analysis? Yes, so the hospital budgets that hospitals submitted on July 1st have been posted to the Green Mountain Care Board website. So we combed through those budgets and we pulled out the requested commercial rate increases from each hospital. We know that submitted hospital budgets are not often approved as filed by the Green Mountain Care Board, at least in total. And so we make assumptions as to what actions the Green Mountain Care Board will take relative to the hospital budgets. What we assume this year is that the very high budget increases requested by the University of Vermont Health Network would be reduced by 1.5% by the board. We came up with that number by looking at past years where the health network also submitted kind of outlyingly higher rates. We also assumed that for other hospitals, the board would collectively reduce those budget requests by 1.5%, again, keeping with past practice. So we applied those numbers to the submitted commercial rate increases and applied the result, fed that into our unit cost trend models, and then allowed those to feed through to premiums. And what we found is that because the hospital budget submissions are so much higher than they were as we assumed in the rate filing, that even with those fairly significant Green Mountain Care Board assumed cuts, rates nonetheless increase by about 0.2% from what we had in the original filing. Would you please summarize where the proposed rates end up as a result of that work? Sure, so after including all of the L&E recommendations, including the hospital budget changes that I just discussed, the overall increase that we're requesting shouldn't say increase because it's in fact a decrease of 1%. And that is comprised of a 6.2% rate decrease for small group and an increase in individual gross premiums of 5.2%. And are those requested premiums that you just described reflected in Exhibit 29? Yes, they are. You can find those on the revised Exhibit 9B within Exhibit 29. And do those figures that you just explained represent Blue Cross's final rate request for the 2022 ACA markets? Yes, that's correct. Thank you. I wanna ask you a few questions about the American Rescue Plan Act, which I'll refer to as ARPA. So do you recall that in your July 6th pre-filed testimony, so your first round of pre-filed testimony, you addressed the impact of the Vermont legislature's decision to split the individual and small group markets and the increased federal subsidies made available to participants in those markets thanks to the ARPA? Yes. Okay, and in light of the market split and in light of those, the changes in subsidy amounts and subsidy eligibility's made by ARPA, which participants in Vermont's ACA markets will end up paying the gross premiums that you spoke about earlier? Only people spending above the subsidy thresholds will pay the full gross premium. Those numbers are about $95,000 for a single individual and $265,000 for a family of four. That represents less than a third and perhaps significantly less than a third of the individual subscribers enrolled with Blue Cross. Mr. Schultz, in that answer you said, you said Vermonters spending those amounts just to make the record clear, could you clarify what you meant? Yes, I meant to say Vermonters earning those amounts. Okay. So how did the split of the individual and small group markets impact gross premiums in the individual market? They increased gross premiums in the individual market. In the case of Blue Cross, the split increased premiums by about 6%. Now, are you familiar with the term net premiums? Yes, I am. Net premiums are the, that would be the difference between the gross premium where the approved rates and the subsidies that were available through the federal government and from the state of Vermont. Okay. How are those subsidies that you just mentioned calculated, the federal and state subsidies? On what basis? I'm sorry. I'm sorry, I should have just stopped talking, please. They're calculated on the basis of a benchmark plan. The benchmark plan is defined as the second lowest cost silver plan offered on the exchange. And at this point in time, are you able to definitively identify which plan will be the benchmark plan for these rates? I can't and that's because there are two plans, one offered by Blue Cross and the other offered by MVP that are very close in premium based on the Lewis and Ellis recommended rates. So depending on what action the board takes in both dockets, we'll determine which of those two plans becomes the benchmark plan. Now, even though you're unable to identify which specific plan will be the benchmark, are you able to make any conclusions about the net premiums that Blue Cross members will pay? Yes, we can. So we can't make an exact calculation both because we do not have the final approved rates from the Green Mountain Care Board at this time and because we don't have income information from members who directly enroll with Blue Cross. But nonetheless, we can do some calculations and we can determine that individual rate payers who enroll with Blue Cross will on average also have a decrease in their net premium and perhaps a substantial one. So given the interplay between the two carriers rates in the way that you just described, along with the federal and state subsidies that you just testified about, what can you conclude about any ordered reductions to gross premiums in the individual market that go beyond L and E's recommendations? So here too, we can't do an exact calculation because of those two unknowns. We don't know what the final ordered rates are going to be and we don't have income information on directly enrolled members but we can make some assumptions. So we can use the recommended Lewis and Ellis rates before applying any sort of changes for hospital budgets because those are known in both filings. And we can make an assumption about the directly enrolled Blue Cross population. So for simplicity, we assumed that half of that population would be below the threshold, that's the new subsidy thresholds and half of the population would be above the new subsidy thresholds. And those thresholds again are $95,000 of earned income for an individual $265,000 for a family of four. So based on those parameters, we can estimate that any further reductions to rates of every dollar of further reduction, 80 cents of that would go to the federal government in the form of reduced subsidy payments to Vermonters. The remaining 20 cents would go to the higher income Vermonters earning above the subsidy thresholds who would have their gross premiums reduced. In the meantime, the lower income Vermonters, those who are eligible for subsidies all the way up to those new levels that I discussed would at best have their net premiums unchanged. And for most further reductions, many lower income Vermonters would actually pay a higher net premium. So in your view, how would reductions of that type? And by that I mean reductions beyond those recommended by Lewis and Ellis. How would that affect affordability of these rates? So it would make things less affordable both for current policy holders who are lower income and also for future policy holders who would have their policy holder reserves depleted primarily for the benefit of the federal government. And Mr. Schultz, the information and analysis you just testified about is set out in your pre-filed testimony, right? That's correct. If you would take a look at exhibit 18, your July 6th pre-filed testimony just very quickly, I just wanna make sure everyone knows where it's available. I'll direct you to page seven, line seven and ask if that information and analysis begins there. Yes, that's right. And then in exhibit 21, your supplemental pre-filed, does the kind of the parallel information appear there at page three, line one, or at least to begin at that point? It does. So the information in exhibit 21 is updated for the Lewis and Ellis recommended rates. The exhibit 18 information was based upon rates as filed. So the exhibit 21 information is the more current. Thank you. So in light of the testimony you've been giving over the past few minutes and the analysis laid out in your pre-filed testimonies, what rate action should the board consider here in the individual market? I believe the board should approve rates as recommended by Lewis and Ellis. If they do otherwise, those further rate reductions make rates less affordable for many lower income Vermonters. I'd like to move to a different topic to, I'll call them historical results in these markets. So if you could turn to exhibit one page six in the binder please. I'm there. Please explain what the table at the top of that page represents. Sure. The table shows historical financial performance for Blue Cross Blue Shield of Vermont in the ACA market. And it includes 2020, which Mr. Angoff addressed in his opening remarks. So I wanna describe what this table shows us and I'll talk a little bit as well about how it is more informative than the information you'll find in financial statements. But first I'll address the columns. So again, I'm at the top of page six of exhibit one. Year and member months are self-explanatory. Filed contribution to reserve also means exactly what it says. That's the contribution to reserve that was included in Blue Cross's initial rate filing for the year in question. The approved contribution to reserve is the expected CTR that we calculated after Green Mountain Care Board rate action. And that number can be lower than the filed CTR for one of two reasons. One is the Green Mountain Care Board in some years directly reduced the CTR. And that would be reflected in the approved contribution to reserve. Secondly, the Green Mountain Care Board in certain years diverged from their actuaries recommendations and made cuts to other assumptions that were not actually supported. The cuts were not actually supported. The assumptions of course were. So that leads us to the calculated approved contribution to reserve, which is really what we expected the result to be. Then we have the actual contribution to reserve. Now these numbers are going to be different from the numbers that you find in our financial statements. And that's for one very good reason. In our financial statements, there are items that sometimes are paid in a certain calendar year that arose because of things that took place in a previous calendar year. For example, back in 2015, we received a favorable adjustment to 2014 transitional reinsurance of $4 million. We took that $4 million out of 2015 results and put it in 2014 results because that's when it actually arose. Another recent example is the risk corridor settlement that we recently received, which again, even though we received that during 2020, we allocated- Did I change my shirt? Someone needs to mute their line and we're getting some extraneous conversation. Sorry to interrupt. I'll refrain from making a comment on the shirt. So that risk corridor dollars were not reflective of 2020 results. We did receive that money in 2020. It flowed through our financial statements in 2020, but that money arose in 2015 and 2016. And so for this exhibit, we allocated it back to those two years because those are the financial results that were driving that settlement amount that we received. Similarly, we're currently involved in CSR litigation. We expect to receive a settlement, but we haven't yet received those funds from the federal government. Nonetheless, those funds are included in this chart and that impacts the 2017 results and the 2018 results. Even though it for financial statement purposes, those funds will be reflected in the year in which they are received. But it's more informative if we wanna assess actual financial performance. It's more informative to do that on the basis of when these items occurred rather than when the cash actually changed hands. Thank you. So does this table reflect final 2020 information? It does not. This reflects 2020 information as known at the time of filing. Since that time we received final information on 2020 risk adjustment. And that was more favorable than what we had included in original 2020 financials. That money will flow through 2021 financials because that's when it's actually going to be received or we came aware of what the new amount was. But really that was a 2020 item. So when we incorporate that additional $3.7 million into the 2020 results, we end up with an actual CTR of 6.4% rather than the 5.2% that you see on the page. Thank you. So we'll address the 2020 CTR in a bit more detail in a moment. First, can you just quickly explain why the actual CTR for 2020 significantly exceeds the approved? Sure, there were two factors. Obviously the pandemic took place and that did have the impact of reducing claims during 2020. Secondly, and actually the larger of the two factors was the morbidity shift that I discussed earlier. Okay, so we'll come back to that in a minute. I just want, first, I wanna ask you, you mentioned it a moment ago. Does this table include the anticipated income from the risk corridor litigation and the CSR litigation that Blue Cross was involved in? Yes, it includes both items. What can you conclude when you compare the approved and actual columns of the table? So I can see a few things. First and foremost, I can see that my team was incredibly accurate in projecting future costs when we look from the period from 2017 to 2019. For those three years, we were never off by more than three quarters of a percent for any single year. And I can also observe that we had aired on the side of rates that were more affordable than what actual results would have dictated. So how have the board's rate reductions since 2016 impacted Blue Cross's RBC? Because we've been so accurate in projecting rates. Every cut that the board made to our CTR has had the impact of creating inadequate rates and depleting RBC. And so when that sort of shortfall results, when rates are inadequate, who covers that shortfall? Vermont rate payers do. When rates are inadequate, it reduces our RBC, which has been ordered to be within a certain range by the Department of Financial Regulation, our Solvency Regulator. So in as much as RBC is depleted, it must be replenished in future years through higher rate increases. So in this way, we can see that rates that are inadequate this year, payment for that must be borne by future rate payers. So does that dynamic enhance affordability? It does not enhance affordability. All these rate cuts below actuarial levels do is to shift costs from current policy holders to future policy holders. And does that dynamic provide Blue Cross with any sort of competitive advantage? It does not. Blue Cross needs to be in a financially stable position in order to invest in the types of innovative solutions that will actually bend the cost curve by improving health outcomes and ultimately lowering cost. So when reserves are compromised, the capital to invest in those projects is either reduced or eliminated. And we may not be able to invest in those types of projects that reduce costs, benefit rate payers, and ultimately improve our competitive position. So let's now circle back to 2020 for a moment. As you noted, Blue Cross' actual operating gains far exceeded the target CTR for 2020. What happened? Yeah, I'll highlight two of the major items. First and foremost, of course, was COVID-19 happened. And we have calculated the impact of COVID-19 was on a net basis throughout all of 2020 was to decrease claims by about $5.8 million. The second thing that happened was, again, the population morbidity shift. We can see that members who left Blue Cross in open enrollment from 2019 to 2020 were very expensive. As a result, the remaining population for 2020 had much lower morbidity than did the 2019 population. That morbidity shift had an impact of lower in-claims by about $11.6 million in 2020. Thank you. So in light of the operating gains that occurred in 2020, isn't it appropriate to cut the 2022 CTR given that the actual 2020 CTR exceeded the approved 2020 CTR? No, it's not. And the reason for that is that Blue Cross has already taken action in that regard. As I testified in my July 6 testimony, there are two items that Blue Cross is funding out of policy order reserves and not putting in premium for 2022. The first of those are the expected COVID costs, the direct COVID costs that we expect in 2020. The second of those is that we allocated less administrative cost to these lines of business for 2022. The combined impact of those two items that we have not put in premiums is $11.9 million that we're returning to ratepayers. So any further cuts to CTR would be both duplicative and harmful to Blue Cross' solvency and therefore to future ratepayers. Mr. Schultz, could you lip to page 9 of exhibit 1? And I want to point you to section 1.8. Okay. That's the section that addresses the Vermont statutory rate review criteria, right? Yes. And do you see there's a quote from 8VSA section 4062A3 kind of just below the middle of the page? I see it. Would you just actually just read from the beginning of section 1.8 through the end of the quote, please? Okay. When reviewing a proposed rate, the Green Mountain Care Board must consider whether a rate is affordable, promotes quality care, promotes access to health care, protects insurer solvency and is not unjust, unfair, inequitable, misleading or contrary to the laws of this state. And in your professional opinion, are the proposed rates, the current final proposed rates, reflecting Alani's recommendations inadequate? They are not. Excessive? They are not. Unfairly discriminatory? No. Reasonable in relation to the benefits provided? Yes, they are. Unjust, unfair, inequitable, misleading or contrary to law? No. Are they affordable while promoting quality care and access to care? Yes, they strike the best balance available among those interrelated criteria. And do they protect Blue Cross's solvency? Yes. Just a couple more questions, Mr. Schultz. How are you able to conclude that these rates strike that appropriate balance among the affordability, quality and access criteria? Well, I can reach that conclusion by taking a look at our cost of insurance. These premiums are composed of three elements. First are taxes and fees. Those are set by government. We have no control over those. Second are claims costs, which are essentially the amount providers are paid to provide care to policyholders. So Blue Cross does participate in all of the state's initiatives for healthcare reform and to attempt to bend the cost curve. And we develop our own programming as well. But ultimately, this is a financial mechanism where Blue Cross takes in premium payments from policyholders and then moves that money to providers for the cost of the care that they provided to those same policyholders. So that leaves us with the cost of insurance, which I would define as administrative costs, contribution to reserves and profit. And when we look at those three things and of course Blue Cross is a nonprofit, we can see that our cost of insurance is among the very lowest in the industry. What's medical loss ratio? Medical loss ratio, and it's sort of the simple definition is claims as a percentage of premiums. The ACA has a somewhat more complicated definition that tends to have a slightly higher result than sort of that simple definition. But the ACA, MLR or medical loss ratio measures what cost of insurance carriers charged in the market. And they've defined that the MLR, which is essentially the flip of the cost of insurance. If we ignore taxes and fees and MLR of 80%, equates to a cost of insurance of 20%. So what the rules are in the ACA market is that if an issuer has an MLR of lower than 80%, meaning they have a cost of insurance of higher than 20%, that's considered to be excessive and all those funds must be returned to ratepayers in the form of a rebate. So what is the recent and projected level of ACA MLR refunds? So based on a Kaiser Family Foundation study of the market, they found that issuers paid $1.4 billion of refunds in 2019 and nearly doubled that to $2.5 billion in 2020. Furthermore, they expect issuers to pay 2021 rebates again that exceed $2 billion. Blue Cross, in contrast, has never paid a rebate in the ACA market and we don't expect to pay a rebate in 2021 or 2022 either. And that's for the simple reason that our cost of insurance is so low. Thank you, Mr. Schultz. Mr. Hearing Officer, may I have a moment to consult with co-counsel and determine whether I have any more questions for Mr. Schultz? Yeah, why don't we take take five minutes and reconvene it three after nine. Thank you very much. Have some break. All right, it's 9-0-3. Just want to make sure the court reporters with us, Ms. Sears, are you? Yes, I am available. Great. So we're back on record in Blue Cross Blue Shield of Vermont's 2022 individual and small group rate filing hearing. Mr. Dinoffrio, do you have any further questions for Mr. Schultz? Thank you, Mr. Barber. I have just one question. Mr. Schultz, could you please flip back to page six of exhibit one to the table? Okay. I'd like to point you to footnote two. If you could read footnote two into the record and then my question is, does that refresh your recollection and cause you to change any testimony you gave earlier about the risk corridors payment? Sure. So footnote two reads risk corridor receivables and it lists the amounts for 2014 through 2016, respectively, totaling about $10 million. These amounts are not included in the actual operating gains and losses in this table and that does refresh my recollection. So we removed the risk corridor amounts from 2020. We chose not to add them back into this table because the table would then not reflect the actual financial performance back in 2014 through 2016. And what I mean by that is that the performance is what it was. It reflects these numbers that were on the page. But the federal government by virtue of the risk corridors program footed the bill for a portion of those gains or losses in the three years. Thank you. I have no further questions. Thank you, Mr. Hearing Officer. Thank you, Mr. Engoff. Do you have questions for Mr. Schultz? Yes, I do. Good morning, Mr. Schultz. Good morning, Mr. Engoff. I'm I'm afraid you understand the risk corridor litigation and the CSR litigation better than I do. Can you explain the difference between those two litigation matters? I'll do my best. So risk corridors had to do with one of the initial three R's of the federal ACA program. Risk corridors were a temporary program that basically were in the federal government was would share in some of the gains or some of the losses that took place in the ACA market. It's very similar to a risk corridor program that has existed for many, many years with Medicare Part D. Unfortunately, what happened with that program is that insurers kind of nationwide had underpriced premiums in the years in question. So this result is would have resulted in significant losses for the federal government and I'm kind of summarizing as best I can. I wasn't directly involved in the litigation. So I probably can't opine on what the federal government was trying to do, but but they were arguing that the risk corridor program needed to be net neutral, so not increasing the costs to the federal government. And so they failed to make risk corridor payments. They made no payments at all in 2015 or 2016 and they made limited payments in 2014. There were a number of lawsuits about this as you as you might imagine. And in our case, the lawsuit was was recently settled in our favor and we received a payment of about $10 million during 2020. That was for those risk corridor payments that were due to us for the years 2015 and 2016. CSR is a little bit different CSR. The Trump administration decided to stop paying CSR in late 2017. CSR, you know, before we had what's commonly referred to as silver loading, CSR payments were made so that we could increase benefits for lower income members without increasing the premiums because the federal government was funding the cost of those enhanced benefits. So when the federal government stopped making payments, issuers in 2017 weren't collecting. You know, they were still make they were still providing the benefits that they had promised, but they were no longer getting this money from the federal government. So again, this brought out another round of lawsuits and we expect to receive payment from the federal government for our excuse me for our risk court. I'm sorry for the CSR payments that they failed to make to us for both 2017 and 2018 because for both years those payments were not in our premiums. Thanks. That's very helpful with this in connection with CSR litigation. Do you have an estimated amount of what you cross is to receive? I don't have it on the top of my fingertips. I believe it's misery. Ms. Green will be able to testify to that exact amount. I think it's in the range of again, $8 million or something like that. And so is that is the CSR litigation recovery amount? Is that reflected in this year's rate filing? The CSR recovery amount is reflected in our projection of RBC, which informs the contribution to reserve component of this year's rate filing. Okay. And the 10 million that you mentioned in connection with the risk card or litigation, where if at all is that reflected or was that reflected? That is also reflected. Well, that was reflected in our RBC as of December 31st 2020 and therefore it is also reflected in our projections of RBC. And again, those that our solvency position informs the CTR that we request, which was one and a half percent this year. Okay. So are those amounts either of those amounts reflected in the rate base in your rate filing? No. You, when you were discussing with Mr. DeNolfrio, the net premiums that would be paid by Blue Cross members, all your answers assumed, didn't they that the board would approve both your Blue Crosses and MBTs rate filing as amended by L&A, correct? Yes. Could you please turn to... Oh, wait, let me just clear this up. We were... You were talking with Mr. DeNolfrio about the table on page six of exhibit one. Yes. Okay. And he brought to your attention footnote two and I just want to make sure that I understand and the board understands the amounts that are listed in actual operating gains in the right hand column. Those amounts do not include the risk card of receivables that are set forth in footnote two, correct? That's correct. Um, could you please turn to exhibit 15 page 10? Okay. And you see there down on line 11 in a row 11 underwriting gain. Yes. You see that? At opposite that in column one and column two, you see 14 little over 14 million for individual and a little and almost 11 million for small group. Do you see that? I do. Okay. First, could you explain what under what an underwriting gain is? So in accounting terms, the underwriting gain is basically revenues, less expenses. Okay. And it doesn't include investment income, correct? That is correct. It does not include investment income. Okay. And is there a difference between underwriting gain and underwriting profit? I'm not familiar with the term underwriting profit. Have you ever heard the term underwriting profit? Not to my recollection. You've never heard the term under, okay. Is this is the 14 million dollars plus in the individual market? Is that that was your underwriting gain in 2020? How, if at all, is that reflected in your individual rate filing for 2022? It's reflected in several ways. Certainly not all of it is reflected. As I pointed out earlier, there are some key differences between accounting results and what I might call experience results. So the numbers on this page do include that $10 million risk corridor settlement that we were discussing earlier. So that $10 million payment had nothing to do with 2020 operating results. So that $10 million replenishes RBC that was lost back in 2015 and 2016. We had some losses and the federal government was kind enough to repay us for a portion of those losses, which was great because that means that future rate payers don't need to make up for those losses. The federal government in part did so. So that's great news. So there were also a few other prior period items in here. For example, there's always claims run out activity is the term that I'll use. So there are claims that took place in 2019 that we did not pay and in many cases we were not even aware of by the by the end of 2019. We didn't pay them until 2020. So we include an estimate of what those claims are going to be a year end, but in as much as claims come in different from that, that will impact the accounting result. But again, that doesn't really impact the 2020 operating result. So it's a little difficult to compare the numbers in the accounting results to what we do in the rate filing. In the rate filing, we begin with actual experience and that includes all of the run out claims and so forth. We begin with a view of what actually took place for the coverage that we provided in 2020. That's our starting point. So because it's our starting point, many of these gains are reflected directly in the 2022 premiums. I'll refer you back to my testimony about the the morbidity change that we experienced. We assume that that morbidity change won't just disappear. We believe that the morbidity change that took place in 2020. We have evidence that that same population persisted into 2021. And we have assumed that it will again continue to persist into 2022. And so we have reduced premiums for 2022 by 4.6% and that's I don't have the exact number, but that's in the neighborhood of $13 million. You said for what we've observed there. The other thing I want to point out that the final way reflected is I gave testimony about the amounts that we're funding through reserves. We're funding $11.9 million through reserves. And the reason we're able to do that is because we did experience these gains, including that risk corridor settlement in 2020, which served to increase reserves. As a result, we are able to offer rate relief of another $11.9 million to 2022 policy holders. So I would I would say to you, Mr. Angolf, that these gains are fully reflected in the 2022 rates that are before you. So are you saying then that that $14 million does not go into surplus? It does go into surplus. Okay. I'll stop there. I shouldn't be interrupting you. Go ahead. It does go into surplus. And again, we are using $11.9 million of that surplus to directly decrease these 2022 rates. Okay. You said that of that $14 million plus $10 million is a risk corridor settlement. Did I get that right? It's $10 million of the combined market. Recall that Vermont had a combined market up until this year, well, 2022 by this year, I mean the rates that are in front of us. So the $10 million was for both individual and small group. I don't have a split of what would be individual and what would be small group. That's okay. Could you show me where that amount or those amounts are reflected in the supplemental health care exhibit? Object to the form. Could you, Jay, could you clarify what you meant by those amounts? Yeah, Mr. Schultz said that $10 million of that $14 million plus are risk corridor settlements. And I'm just asking him if he could point to the place in the supplemental health care exhibit which shows where those risk corridor settlements, the total, according to Mr. Schultz, $10 million are reflected. I'm not an expert in the financial statements. So I'm not able to answer that question. I'm sure that Ms. Green will be able to offer testimony on that point. Okay. I will ask Ms. Green. Ms. Green. Could you turn to, back to exhibit one, go to page four. Okay. Okay. And then in the little chart, you see trend component, the first line is restatement of 2020 to 21, restatement of 2020 to 21. Does that mean that you assumed a higher trend for 2020 to 21 then turned out to be the case? We don't know yet because 2021 hasn't entirely taken place. So what it means is that we are using a lower trend assumption in this year's filing than we used in last year's filing. And then additional year of medical utilization of 1.5%, what is the year for which that 1.5% applies? So this is a comparison, you know, this is trying to get us from last from the 2021 rates to the 2022 rates. And what we mean by an additional year of trend is that, is just that we rather than trending everything to 2021, we're trending it to 2022. So this is the additional year from 2021 to 2022. Mr. Hurling officer, I've got a whole line of questions about the RBC ratio. I know some of that is non-public. I can either go into that now in executive session or I can skip ahead and then we can come back if you want to do the RBC non-public discussion at the same time as some other matters might be non-public, whatever is more convenient for you on the board. Some of the RBC numbers are non-public and some of them are public. So I'm assuming that your questions relate to the confidential numbers, which are by and large forward-looking. They relate to both. And it would be sort of, they'd be sort of a nuisance to go in and come back out. Maybe the best thing for me is to skip ahead and then come back to the RBC discussion and we can do that in an executive session with other matters, but whatever you prefer. Yeah, I think because I'd like to get to the commissioner's testimony before one because the Oliver Wyman actuary is only available until one. Yeah, I'd like to not break at this point for an executive session because I think we'd have to do it again. So if you could save it in the executive session, we can make sure that Mr. Schultz and any other necessary witnesses are there. That's fine. Mr. Schultz, could you please skip to page 26 of the exhibit one? Okay, got it. Okay, and there you see the heading inpatient facility claims. Yes. Okay, and then in the third paragraph, you're getting using the array to see that. I do. Okay, and then in the second sentence, the second sentence says that you get certain time series methods such as those assuming no trend and those assuming the trend is dampening are not included because they're inappropriate. Why would you not include methods assuming that there's no trend or assuming the trend is dampening or decreasing? Objection, and I'm not even sure if it's an objection, Jay. I just want to point out that your quote of that sentence omitted some language. So I just want to make sure the witness is aware of the full language of that sentence. That's fine. I was just trying to shortcut things, but Mr. Schultz, why don't I not shortcut things and why don't you just read that sentence? Sure, certain time series methods such as those assuming no trend, those assuming the trend is dampening or those for which there is not sufficient historical data, and there's a footnote about that particular comment, are not included as these are inappropriate for use in trend development and or for the data available. And my question is doesn't have to do with methods for which there's not sufficient historical data. My question just focuses on the first two phrases, trend methods assuming no trend and those assuming the trend is dampening. In that sentence, you say that those methods are inappropriate for use in trend development and I would like to know why that is. Sure. So if we're trying to come up with an assumption, it is not a valid way to do it to assume that the answer is zero and then come up with your assumption. If we've assumed the answer is zero, then the answer is zero. These particular statistical models are not just applied to medical costs. They can be used in a variety of practices. In some practices and what these statistical methods attempt to do by and large, these time series methods, is to differentiate between seasonality, which are the minor ups and downs that you see over the course of a certain time period and an actual trend, which is as we know, it's an overall increase or change in the cost of services could be an increase or a decrease. So among the various tools that exist for time series, some of them assume, some of them say what if there's trend but no seasonality? Others say the exact opposite. What if there's seasonality but there's no trend? And it's just a simple fact that if you assume there's no trend, the answer you're going to find is zero. So that lends nothing to our analysis. It's obvious that if we assume it's zero, then you're going to come up with zero. If we assume it's five, it's going to come up with five. We don't do that. We take a look at data and we study that data in great detail and as a result we form a trend assumption based on the data. We don't form the assumption first and then move on from there. Would you agree with me that trend can be negative? Absolutely. Okay. And you see in the second paragraph, not immediately following that paragraph, but the one after that, in the first sentence there you say many time series project highly negative trends producing projected negative claims. And then you say they're unreasonable in this context. Do you see that? I do not. I'm sorry. It's the paragraph beginning due to 2019 results. Okay. Thank you. I do see that. Yes. So why would a... Here you've got a time series projecting highly negative trends producing projected negative claims. You're saying they're unreasonable. Why should they be any more unreasonable than any other type of time series projection? For two reasons. They don't fit the data well as we continue the projection. And secondly, they kind of reduce to absurdity. If we assume the trend is going to decrease by, you know, eight or 9% every year soon enough, we get to a place where nothing costs us anything. And that's simply an absurdity. Is there any place in your discussion of trend in this refiling in which you give, at which you give a methodology that results in a negative trend, any weight in your trend analysis? The one I can think of is that we do assume that there will be a dampening of pharmacy trend. The ultimate result is certainly positive, but we assume a dampening for a couple reasons. One is contractual. And the other is that we assume that brands will lose their patent and that the number of generics will increase relative to the number of brands. So there are certainly components of our trends that are negative. I don't believe we have any final results that themselves are negative. What is the year over year trend? Year over year trend compares one year to the next. So if we're just looking at raw information, what is the PMPM, the per member per month, claims in one year compared to the following year? Okay. And you generally do not give... Well, let me ask it this way. On page 27 in that table there, when you show the year over year trend as being a negative 0.4%, how much weight do you give that in coming up with your outpatient facility claim estimate? We took the weighted average of the... And we gave equal weight to my recollection of the year over year trend, the 36 month regressions, which are the following two numbers, which are just over 1%. And the time series, which are very close to zero. So we took a straight average. We didn't weight it in any way of those items. And that informed our 0.3% selection. Okay. By the way, when you talk about a selection, what do you mean? We're choosing a trend. We're choosing a trend assumption. A trend assumption is not a calculation. There's no formula that says you plug in A and B, do some mathematics, and you end up with C, and that's your answer. It's an assumption that is informed very heavily informed by the data, but we assess the data in a number of ways and use our actuarial judgment to select an answer that we believe is the best answer. Okay. And you're certainly not arguing, are you, that your answer is the only reasonable answer for trend? Correct. We all agree, don't we, that 2020 was a very unusual, if not unique year, correct? I agree. And what happened in 2020, we don't expect to continue on in the future, do we? Let's hope not. Okay. So why then do you assume in your trend analysis that mental health services, which obviously increased during the pandemic, are going to continue at the rate that they've been during the pandemic, that they're going to continue with that rate in the future? For two very good reasons. One is that we can observe experience prior to the pandemic, and we also see very significant increases in mental health during that pre-pandemic time period. And secondly, we can take a look at emerging 2021 data, and we can make the observation that not only are mental health services increasing at the rate that we have in this filing, they're actually increasing at about twice the rate we have in this filing. And we speak to that in our COVID modeling. Our best estimate is that mental health services will continue to increase at a very, very high pace throughout 2021 and likely into 2022 as well. However, we do not fully reflect that expectation in our premiums. Instead, we reflect this trend, which was informed largely by data that existed pre-pandemic. Do you think it would be unreasonable for the board to conclude that mental health services went way up during the pandemic? But like so many other things, after the pandemic, they're going to return to pre-pandemic levels. I'll object to the form. Calls for speculation. Could you restate the question, Mr. Angoff? Yeah, I'll state it in a different way. Do you believe it's unreasonable to conclude that mental health services will go back to their pre-pandemic level after the pandemic? Yes. Okay, could you turn to page 29, please? Okay. Okay, and you see there for all professional utilization except excluded categories, the trend is a 0.5%, right? I see that, yes. Okay. But for mental health services, it's 13%. Yes. And that produces an overall 1.8%, right? With the small facility component, yes. Right. Okay. But you're applying that 1.8% to all outpatient services whether or not they include mental health services, correct? As a means of simplifying our calculations, yes, that's correct. Could you turn, please, to page 30? Okay. Okay, and you see that you've got that chart there and you assume in the paragraph below that chart you assume a trend of 6%. Yes. Is that okay? How do you arrive at that 6%? We took a look at a variety of majors, which we summarized in the chart. And we excluded certain outliers from among the many statistical analyses that we did, all of which are not summarized in the chart, but are inclusive of what we summarize in the chart. And then we concluded that it would be better to pay more attention to the longer term results as being indicative of longer term patterns as opposed to using some results that appeared to be heavily influenced by short term fluctuations. Would you agree that it would also be reasonable to take an average of those 6 numbers and use that as your trend? I'm not sure. I would have to go back and do the analysis to see if I thought that result was reasonable. But taking an average is an acceptable, various methodologies is an acceptable actuarial technique, correct? It is, but it doesn't necessarily mean that it leads to a reasonable answer. Again, actuarial science is not a rote at this plus that and take the average and you get the answer. It doesn't work that way. Actuarial science involves professional judgment and we need to come to the conclusion that the result that we get from doing analysis is reasonable. We can't just form that conclusion based on whether or not it's a reasonable approach. We also have to form a conclusion about the reasonability of the result. Sure. But you agree, don't you, that another actuary could come to a different conclusion as to what the trend would be and that could be reasonable. Yes, another actuary may conclude that a higher or lower trend is reasonable. Should you turn please to page 33? Okay. Okay, and then you're talking about brand cost trend in the middle of the page. There's a paragraph beginning with vaccine costs. Do you see that? I do. Okay. And you say you include a 20% cost trend. Can I ask you what the basis for that is? Yes. The basis is actual year-over-year experience for each of the past three years. And then you say two paragraphs down. You say we select an overall cost trend for devices of 25%. Could you tell me how you selected that? Yes. So this one we took a little bit closer look because some devices are experiencing very, very high trends. So we took a closer look at Market Share, which devices are emerging as the preferred devices. And in doing that detailed analysis, we could see that some of the more expensive devices are being preferred over their less expensive counterparts. So we then projected the, made some conclusions about what Market Share would persist into the future. And the math on that led us to make an assumption of 25% for that very tiny component of prescription drug trend. Okay. But again, there's no formula you followed, right? No. There is no formula. We must apply a methodology, of course, and that methodology is reasonable, but there is no road formula. That's correct. Could you turn please to page 35? Okay. And you see there you say you selected a 0% trend for vision trend. You see that? Yes, I do. Okay. Looking at the numbers, would it also be reasonable to select a modestly negative trend? Yes, that would, it would be reasonable to select a modestly negative trend for vision. Yep. Could you turn please to page 45? Okay. Okay. And there's the subhead impact of selection. You see that? I do. And then could you, could you read the second sentence for me? Well, for, sorry, read the first two sentences. Subscribers will make financial decisions that are right for them. Typically this manifests itself in healthier subscribers selecting low cost plans, while less healthy subscribers select richer benefits. Okay. And could you explain why that is? Typically if you, if one, if a reasonable person is aware that they're going to have high medical costs in the upcoming period, they will choose a richer benefit package so that they, it's a trade off, right? They're choosing between do I want to hire premium so that I have lower out of pocket costs or do I want higher out of pocket costs while paying a lower monthly premium? And if a, if most, most people who are aware that they're going to heavily utilize medical benefits tend to make the choice of paying a higher premium so that their out of pocket costs can be lower. Okay. And so isn't the, isn't the carl area that the people who are healthy are going to be less likely to have generous health insurance plans? Yes. And the extension of that is, isn't it people who are healthier are going to be less likely to buy insurance? Yes. Okay. Then with this new system with the new subsidies that are coming into law in 2022 where for the first time people that you said what the income levels are, but they're obviously higher than they've been in the past, isn't it reasonable to assume that those people are going to be much healthier than the people already in the system for whom it made economic sense to buy insurance without those heavy subsidies? It's reasonable to assume. I'm sorry. Good. Object to the form. If you understand the question, you can answer. I do understand the question. And while I would dispute that they're necessarily much healthier, I would agree that they would be healthier. Okay. Mr. Hearing Officer, that's all I have on non-RBC related issues. So I'm happy to proceed. However, you and the board see fit. My preference would be to proceed to board questions, move on to Ms. Lee's testimony, and have Mr. Schultz continue to stick around for a likely executive session. So I'm going to move to board questions at this point. I'm going to start with board member Holmes. Do you have questions for Mr. Schultz? Mr. Hearing Officer, I apologize to interrupt. Just to clarify, if appropriate, I'd like the opportunity for perhaps some short redirect after the board questions. Yep. Thank you. I forgot to mention that. Yep. Thank you very much. Sorry for the interrupt. Member Holmes. Yeah. Actually, at this point, I think most of my questions were answered. If any questions come up when the other board members ask, I would like to be able to ask additional questions. But right now I'm set. Thank you. Member Pelham. Thank you. Thank you. I, as I, as I. Follow this. Oh, what a tangled web we weave. It's a, it's amazing to me that here we are looking for a nine tenths of 1% reduction. And it's only valued at about 1.5 million. And there's just a elaborate process we're all engaged with to bring that into some kind of landing. But so I do have a few questions here. Paul, I want to thank you and your counterpart MVP. It's fascinating to watch the clarity with which both of you know your, your, your subject area. And can convey it to us. So my first question. Has to do with exhibit one page eight. And there's a fourth layer. Having to do with the VH, the raw health connect billing system. So shifting the billing for Vermont. And that's from Diva. I'm sorry, Mr. Pelham. Pardon me. Can you speak toward the computer for me, please? I'm, you're breaking up. Okay. So I'll read from my notes rather than from the binder. Okay. So it says shifts. Can you hear me better now? Yes. Okay. So it says shifting the billing for Vermont health connect from Diva to the carriers is moving the cost for this service from the state to rate payers. And will become an additional component of health insurer administrative expenses. And so that inherently is the definition of a cost shift. And as you folks have said in past filings, the cost shift is a significant force. In, in, in, in, in, in premiums. Later. In the next 40 years. In Exhibits. Six. Page 25. The, the finances associated with that statement or profile, then it has. For VHC billing in the middle of the page. That that this would add a $3.82. Per member per month. And as I multiply that out. applied it to the individual filing. It was not applied to the small group filing. So the whole burden was put on the on the individual filing at $3.82. Whereas later on there's a section that applies it to the entire both filings and it ends up at $1.75. So it just applying it to the individual group is $3.82 times 15,818 members and you get $727,000 is the cost of this. And if you use the other methodology to apply it to the entire membership, it's $1.75 times the entire membership, you get the same $727,000. And so especially in the context of this process and maybe even in the context of the co-payments that have already been approved by Diva that are embedded in these plans, it's a significant amount of money. And so I'm just wondering in your negotiations with Diva about this, whether or not there was any conversation to have Diva, I guess there are efficiencies of having the carriers you do the billing. And so that that's why the movement was entertained. But what that means is that Diva saves money because they've shifted it off to you folks and you folks are now shifting it on to ratepayers. And I'm just wondering if or maybe we folks who knows where all this ends up. But so I'm just wondering if you had any conversations with Diva that somehow they would help financially while they would rid themselves of the operational responsibilities, they would help you financially to offset this cost shift. I personally have not had those conversations. I wasn't part of the transition team at all. Ms. Green may be able to answer that. I think she was more directly involved in what happened there. Okay, thank you. So my next one has to do with capitation. And so if we go to exhibit one again, page seven, you know, you're how you profile engagement with healthcare reform and capitation was a little confusing to me. So on one page seven, there is a I'm quoting here so that the recorder can hear me. Blue Cross Blue Shield Vermont has supported and participated in the state's all payer model healthcare reform efforts since its inception. We are the only insurer that has enabled participation for the majority of our members in all types of coverage, including the individual small group markets and large group insured and self funded customers in risk based arrangements. We are currently working to expand fixed prospective payments with willing partners. But then later on exhibit one on page eight, it reads, although measurable progress toward the state scale goal was achieved by the attribution of several thousand Blue Cross Blue Shield Vermont large group members in one to one care, an analysis of 2019 results indicate one cares performance did not result in savings relative to the medical expense. Because the performance to date in this arrangement gives no clear basis for projecting savings in the near term. This filing does not include any adjustment to projected expenditures relating to one care program. So there's those, I think there's a little bit of conflict there, maybe, maybe not. But I would like that explained or your answer to be viewed in this context. If you go to, and I'm not going to turn here, you can do it if you want. But exhibit nine page four has the capitation amount. This is the development of the index rate has the capitation amount at $5.48 of a total index rate of $719.44 for the individual filing or seven tenths of 1% associated with capitation. And again, for an exhibit nine page five for the small group capitation, it's at $9.54 on a base over a base of $602.11 for 1.58%. So I'm kind of trying to figure out where this filing takes us down the road of health care reform. And I see the foundation that exists already is pretty meager at less than 2% across both the filings. And the narrative that says this filing does not include any adjustment to projected expenditures related to the one care program. I'm wondering if you know, where does that leave us? Does this kind of imply that health care reform in terms of a capitation rate, which is in terms of capitation, which is fundamental to health care reform, it's one of the pillars of health care reform is kind of on the slow boat here. And we shouldn't have any great expectations about blue cross blue cross blue shield, pushing the envelope and trying to encourage more willing providers. Those are your words or blue cross blue shields were willing providers. And can you discuss a little bit about why there are so few willing providers in your experience? Okay, so there's a lot in there. Let me start by saying that fixed perspective payments and capitations are not necessarily equivalent. The capitation that we include in this filing are capitation arrangements we have primarily with certain PCPs, which are different from the fixed perspective payment arrangement that we do have with one hospital through one care Vermont. So I will say blue cross is fully committed to health care reform, including payment reform as well. And we are working with a whole host of different organizations in varying efforts to move forward with payment reform. Now payment reform doesn't necessarily mean capitation in every cut. There are a number of different ways to peel the onion, if you will. There are shared savings, shared risk arrangements. There's pure capitation is kind of the one of the far ends of that. So we are certainly attempting to move those efforts forward. But it is true that it takes two to tango. We need willing partners in that and we have found some willing partners. But even at the time of the downturn in hospital services, we reached out and spoke to facilities about would you want to set up a fixed perspective payment mechanism? And none of them took us up on it. So we do have one facility through one care who is involved in fixed perspective payment. And I'm sure others will get there over time. But it's a different world for the providers as well. And we're not in a position to say it has to be this way. We're working with our providers and in partnership to try to, you know, we're working toward the same objective. We all want to bend the cost curve. We all want to provide quality care. We all want to make sure patients have access to care. And so we're working with them in partnership in the best way that we can. I don't know, you know, I'd purely be speculating if I tried to tell you, yes, I think we'll get to a certain place in payment reform by a certain date. That's a bit beyond the powers of what I'm able to project. But we are making strides in that area. We're pretty excited about some of the new opportunities that we'll be able to introduce over the next year or so. And we'll continue working with One Care Vermont and with other organizations in this state to try to get toward more of these payment reform models. I mean, I do understand that there are other aside from capitation, other value based approaches. But it seems that all of those are built on the infrastructure of fee for service. And capitation is the one that really disconnects us from fee for service. And that's why I emphasize it. And I do understand that there's a critical mass that we've got to get to in terms of capitation in order to have to experience the benefits that it offers. But it just seems, you know, in this filing and for the coming year, we're in a very small corner of the world here. And I'm wondering if you have any suggestions for the Green Mountain Care Board as to what we could do to make your partners more willing? Wow. That's a big question. Thank you for the opportunity. And I don't know that off the top of my head, I'm prepared to give you a solid list. But one thing that is extremely important to Blue Cross and I would suggest the Green Mountain Care Board should keep in mind as well is that just getting the capitation can't be the end game. There must be a way to return any savings back to policyholders. If we're living in a world where rates are capitated and in fact less care is used because we're more efficient and we're providing higher quality. If all of that difference between the capitated rate and the actual expenditure that was, you know, then we'd like to believe will be lower. If all of that accrues to providers, we're not at all satisfied with that arrangement. There must be a mechanism that at least a portion and preferably a significant portion of that difference can be returned to everyday Vermonters who are paying premiums. So that that I would say is our number one concern as we're talking about payment reform. Well, thank you for that. I just worry that we're two, three, four years down. Can you hear me? Yes. Okay. That we're two or three or four years down the road of health care reform and these kind of statistics I presented should kind of show where we are and that just worries me that that rate payers and your policyholders at some point are just going to say what's it's all about? It's not happening. So I fully agree with you that this has to trickle through, you know, to rate payers. So my next question has to do with income from uninsured plans on exhibit 15 page 16, which is the supplemental health care document, you can see in the column for the line items called income from uninsured plans in calendar year 2020, a 35 in terms of income to Blue Cross will shield of $35,897,889. Do you see that number? I do. Yes. Okay. So that was the revenue. Later on in exhibit 23 page 21, which is a profile of expenditures, you find that exact same number as a reimbursement by uninsured plans to the administrative expenses of Blue Cross Blue Shield, those expenses including cost containment, claim adjustment expenses in general administrative expenses. And so I look at that and I say, how do we know whether or not the uninsured plans and by uninsured it's not uninsured individuals. It's just where you folks provide the administrative efforts, you know, but the the person that you're the company you're working with is actually they pay the claims. So but I'm wondering from this accounting approach how we can know whether or not the uninsured plans are subsidizing the administrative expenses of other parts of Blue Cross Blue Shield's portfolio or whether or not we're subsidizing them. I do note that in 2020 19 the income from fees for uninsured again from the same the same document a prior year in a prior year was $33,424,000 which was the same pretty much the same amount in calendar year 2018. So I'm just wondering there's obviously a relationship because it's this is plugged in as a reimbursement and I and therefore could flow through to this filing and you know through a back door and I'm just wondering what your expectations are for income from fees for the uninsured in 2021 and 2022. Yeah great question. I actually have two answers to it. I unfortunately cannot show you how we can observe that through the financial statements. I'm not sufficiently familiar with all the detail the financial statements to be able to point you to something but I do know from the work that I've done as Chief Actuary at Blue Cross that the ASO business because we sell ASO business the fixed costs that are allocated or that need to be allocated to this to these insured lines including ACA which is by far largest insured line are lower. So in other words if that ASO business went away we would have to find a new home for all the fixed costs that the ASO business supports and for lack of other options that new home would have to include the ACA filing. So if you know I hope that I hope that answers you. I know it's not a full answer to your question but I hope it at least gives you the the idea behind what you were asking and that is that because we have all that ASO business we are able to offer lower administrative fees to the ACA market. So is there within Blue Cross Blue Shield an accounting procedure that does separate these types of businesses so that for the uninsured plans it's a tough on their own bottom and here's the revenue and here are the associated expenses so one could know whether or not if there's any kind of cross subsidization going on. We do that accounting yes and I would say there is no cross subsidization these these things each line of business stands on its own. Now whether that line of business performs well or not may be a different matter but I would say there's certainly no cross subsidization and I would further say that the existence of the ASO business means that we we don't have to allocate all of the fixed costs to our insured business and that is helpful to our insured ratepayers. Well the reason why I ask this question because it's a big number I mean 35 36 million dollars is a big number and so that's why I was poking around there a bit. I'm looking at again in exhibit one page 50 was the presentation of the total administrative costs on a statutory basis and on a gap basis and in the one of our inquiries we asked if we could have that profiled for 2018 and 2019 as well and I notice that when you kind of put those three years together and I'll just pick the total administration on a statutory basis in 2018 it was 40 million dollars in 2019 it was 27.9 million dollars and in 2020 it was 37.3 million dollars and I'm just wondering about that volatility did that have something to do with your re-benchmarking of your fixed cost and variable costs you know I mean that that's a 2019 is a significant outlier from the other two years that's around it and I'm just wondering what might explain that. To my recollection 2019 was the year that we had a pathway two AHPs in the market and so we saw a pretty significant movement away from the ACA market and into those AHPs for one year only and so I'm sure that's part of the difference off the top of my head I don't know that I could give you a full reconciliation. Okay, thank you. So as I'm sure you know because it's in full bloom in your filing about the you know the upcoming process to to redo Vermont's benchmark plan with CMS and so the legislature has basically said that we need to assess whether the benchmark plan is appropriate I'm reading here now is appropriately aligned with Vermont's health care reform goals regarding population health and prevention and in addition they're asking that certain additional benefits be considered and those include hearing aids for example vision etc and I'm just wondering from an actuarial point of view what your thoughts are especially given that the legislature is expecting we're reporting that it's coming January so it's a very short turnaround time what what your thoughts are about how that process might affect you know and obviously building off this year's plan designs how it might affect plan designs in 2024 for example. Sure, interesting question and I think really the root issue at hand there is is one of trying to balance access and affordability. We can certainly we have the information that we need to study the issue to study you know what would the cost be if we were to add a hearing aid benefit for example and we will do these analyses and the work group that's been convened will work with actuaries to do those analyses and at the end of the day it comes down to access to care versus affordability if we if we want to if it's worthwhile to improve access to hearing aids at the cost of an additional whatever the dollar figure comes to in terms of premium then that's that's what you know the the board and stakeholders other stakeholders will have to wrestle with as we try to determine what should be in and what should be should be not in but you know we do have the actuarial tools that will allow us to put a cost estimate on there and that if benefits are enhanced then those costs will be added in the next you know in the applicable filing if if other benefits are reduced elsewhere then similarly we would reduce those estimates and allow those to flow through premiums as well so that that's the analysis that my team will be doing as actuaries and the really frankly the hard decisions are going to be at the stakeholder level and trying to decide is it is it worthwhile to ask Vermonters to pay a bit more in premiums to to decrease affordability so that we can increase access to care it's a it's a tough you know it's a tough decision to have to make but but I think it's great work to be doing so I mean and it does seem to open the door to an opportunity to make sure that our benchmark plan that the low value benefits or maybe you you viewed as a target to pay for some of the higher value benefit I'm sorry mr. Pelham you broke up could you start again please okay sorry I'm I'm I'm facing you I don't see you but I'm my face is to argue the it just might be an opportunity to to look at because the benchmark plan I think was put together in 2013 or 2014 to look at low value benefits that are sucking up actuarial value in order to support some some higher value one of the ones that I keep harping on is that our benchmark plan doesn't have a pre-diabetic program you can get a nutrition counseling but you can't get any physical exercise of therapy and and we have a plan that does it which the the blueprint operates with a cdc sanctioned pre-diabetic plan so those kinds of trades I think are are possible and my final question is just is it just a very broad one because I'm not an actuary but it's about medical trends for example so let's take the medical trend for unit cost that is developed based on Blue Cross Blue Shields data warehouse data in your data warehouse and so it's based on claims that are paid based on contracts that you negotiate with prep providers so I'm just wondering if there's any sense that a rising tide lifts all boats you know if the Green Mountain Care Board you know is is generous then that's good for Blue Cross Blue Shield and it's good for the providers if we're kind of tight wads that squeeze gets felt by Blue Cross Blue Shield and and the providers because it's just an interesting dynamic that the data that we're using to measure trend is data that you folks have negotiated with with your providers and so it's it's it's it's not as independent and free market as one might like these transactions to be so you can take that as a statement but if you have a response I it's just something I worry about that it's it's in this process it's it's the most of most of the medical trend is based on relationships you've all you've developed with with your providers and so you look in the rear of your mirror and uh actually and you say well this is what we've done and and therefore based on that trend that this is where we should go um and I'm just wondering if there's any qualifier to that yeah so okay thank you I wasn't quite sure where to go with my response but that now I think I can I can give one so you know we we don't only look backwards for unit cost trends we we look forward as well and we do that in a couple of ways one is by examining the recently submitted hospital budget information which as we know goes a long way toward defining where we're going to be with all of our hospital providers for providers that aren't part of the green modern care board budget review process we don't strictly look backwards we do take into account um forward-looking information as well by way of example and I didn't mention it earlier but we did negotiate a contract with Dartmouth-Hitchcock Medical Center that started on July 1st and that result was favorable to what we had in the initial filing so in making the adjustments I talked about earlier for hospital budgets we also included the results of that negotiation and one other New Hampshire facility as well obviously Dartmouth is the is the big behemoth over there and the one that's really impactful to claims and so that successful negotiation relative to what we had initially put in the filing uh didn't help to keep the uh that impact lower there was a that point two in other words that I mentioned earlier was inclusive of what we negotiated with Dartmouth-Hitchcock um so you know for that for unit cost specifically while it's certainly informed by where we've landed in the past um and in particular a time of filing for the green modern care board facilities that's exclusively informed from by where we landed in the past we do update it for information that we learn um over the course of the year including information that we've learned between the time of filing and today well thank you for that and thank you for your for your time today thank you mr. Pelham okay now we'll move to board member lunch thank you hi paul i hope you're doing well today thank you robin i hope you are too thanks um i have a follow-up on the vermont health connect billing issue so the three dollars and eighty two cent p.m. p.m. um just to make sure i have this right is the the total amount for the vhc billing it's not it's not inclusive of other admin billing related costs right that's what we expect to spend specifically for the vhc billing in 2022 so that that doesn't include startup costs but that's what we that would that's what we expect to spend in 2022 okay and the startup costs were included in last year's filing is that right am i remembering that right i believe that is true okay thank you um i wanted to and you can let me know if this is a better question for Ruth um but related to the vermont health connect um direct enrollment and the availability of arpa subsidies for those who shift from uh directly working with blue cross to enrolling through vermont health connect in the uh information you indicated there were 400 and 4682 members who were directly enrolled as of May 31st does that sound right sounds right yes it's on if it's helpful it's exhibit 13 pages 9 to 11 thank you um and also in that same exhibit you indicated as of June 18th 226 members had switched do you have an update on that uh Ruth will have the best update on that the latest number i'd heard was something over 500 members okay and your assumptions that you made in your arpa modeling were were i understand they were rough but that about half of those members uh potentially were eligible for subsidies um so let me clarify that in that yes in the arpa modeling yes we we did a calculation assuming that half would be eligible for subsidies we we have no idea quite frankly sure um if if i had to guess you know those dollar amounts uh 265 thousand for a family of four seems pretty high to me so i i my best guess would be that that more than half will be eligible for the subsidies but we quite frankly don't know we just we just don't have the information yeah thank you um i had a question related to the land framework calculations is that also a better question for Ruth in terms of uh in exhibit 13 page hold on just one second five uh we had asked you to put your claims into the learning action network framework and there's 49.8 percent in all pair models with upside and downside risk i'm assuming that's the one care vermont a co program yes okay and the point one percent in fee for service of linked to quality and value could you tell me what that is um i i'd be guessing quite frankly so i um okay i think someone else we'll be able to probably root we'll be able to speak to that better than i can perfect um that sounds fine i just wasn't sure which of you had prepared that um so i wanted to switch to the telehealth area um and um i was curious to hear a little bit more about how telehealth was included in your utilization impacts from the filing it looked to me like that was largely embedded in the mental health utilization trend yeah that's i mean so that's that's a that's a valid point um again what we've experienced recently or mental health utilization trends far in excess of what we actually put into the filing um so if you compare the filing to our coven modeling you'll note a much higher trend in the coven modeling based on emerging results that i think are far more inclusive of the of the telehealth uh impact so i i you know it's it's it's not an even split so i can't tell you that telehealth didn't impact the filing uh in terms of what we're assuming for mental health but by and large as i testified earlier that assumption was strongly informed by pre-pandemic experience um so i i'd say that um that we're not we're not we're starting on explicitly increasing the file rates for that sure and i don't think it's in there implicitly in it in a great way either um i do agree that broadly um what's happening in telehealth will flow through future rates and in the way that you know that according to the underwriting cycle that we normally see um we we think there are well we know there are some some benefits and perhaps some costs to telehealth the the ease makes it much easier to access care and so utilization may increase you could see some duplication of services um if there needs to be follow-up after the telehealth visit um such that it did not actually replace some other sort of care um but you know and and frankly since it's being paid at par right now you don't really have the cost savings either to go along with it so you might you might be um you know again you might be increasing access to care um at at the price of a little bit of affordability and we'll continue to monitor that and as that information flows through actual experience as as you've seen uh earlier in the filing with the morbidity change we will allow that to flow through to future premiums um we did not make an explicit assumption in the filing about telehealth increasing or decreasing cost we assumed that zero was our best estimate at this time um and that uh you know we'll continue to assess it and see how it flows through experience and let it work through rates in in that way okay thank you um and do you this also may be a brief question so forgive me but um are you anticipating making any change to payment rates as a result of dfr's order on audio only uh reimbursement which allows for 75 percent reimbursement for audio only so i can speak to that i think just at a high level i certainly don't want to get into contracting and i'm not involved in that contracting anyway and so i you know couldn't comment on it even if i wanted to but i you know we we will comply with dfr's order and we're prepared to make sure that we are in compliance um you know as i understand it that applies to audio only services um so again there are some trade-offs there as dr mackintosh will could could testify later um there are some concerns about the efficacy of audio only for many issues for for some issues it's perfectly fine but but clinically and of course dr mackintosh will be able to speak to this because she you know she's she's as she is a clinician unlike myself um there are some questions about the efficacy so we do have some concerns about the potential for duplication of care um and we have some concerns about simply the fact that you know you used to be able to pick up the phone and call your doctor and now you're going to be charged for that so it'll be interesting to see how it all plays out i think one key piece of of dfr's mandate is that we'll start having different coding for audio only right now unfortunately we do not and so we're not able to fully study it and form conclusions about whether we expect it to be helpful or harmful when it comes to cost so this is another one of those things where you know we'll start having the coding in 2022 that will allow us to study the issue so once we have the coding we get a little bit of experience we'll be able to do some analysis and then form some conclusions for for some future rate filing great um thank you paul so um my last couple of questions have to do with the arpa modeling around the premiums um are you generally familiar with the process that happens with qhp's after the green mountain care board sets premium rates not sure what you mean by the the process are you aware that the commissioner of the department of vermont health access has a certification requirement for qualified health plans yes and as part of that process the commissioner may or may not accept every plan that has a premium set by the board yes i'm aware of that okay and are you aware that uh at least once in the past the department of vermont health access has not accepted all the plans i am thank you um in um so that so but you're modeling sort of assumed that in that process uh the diva commissioner would accept all the plans that the board approves yes my recollection is that they've they've always done so for plans that are already in place in other words i i can't recall an instance where they have removed a plan that was already in the market such that vermonters who were in that plan had had to find another option they they have right i'm sorry but uh for example if the diva commissioner were concerned about maximizing subsidies through by a choice of the second lowest cost silver plan the diva commissioner could certainly make a choice about which plans to accept in order to determine which plan would be the second lowest cost that is true um should the other question i had related to your review of mvp filings um so in your pre-filed testimony you indicated that you had reviewed mvp filings as part of your arpa subsidy in a general way um and you tested i guess you probably need to say yes or no for the record yes i'm sorry yes that's okay um and uh are you aware that ellenie's recommendations related to mvp would impact both small group rates and individual market rates yes i'm aware of that okay so uh should the board uh for example choose to reduce a factor that would impact both individual and small group market rates not that could potentially under your modeling be harmful to individuals with subsidies right yes but that could also help potentially small businesses and small business employees by further reducing those rates yes okay thank you um i think that is all i have thanks paul thank you robin okay now we'll move to board member usper thanks hi paul um first a question on um the morbidity shift um the 11.6 million dollars that you talked about um which is pretty significant and um i guess could you talk about your shift in membership so i think there was a decline of maybe about 5 000 members and are you able to map um the people that actually left to to validate that they really were the high cost users yes very insightful question and that's exactly what we did um we we took a look at um that the members who and who did leave us from 2019 to 2020 and what we saw is that those members were unusually expensive we've we've done the same analysis in past years we did the same analysis for 2020 into 2021 um and 2019 into 2020 was a significant outlier um the members who left us were were far more expensive and then we know that by looking at 2019 claims so it's all pre-pandemic claim information um the 2019 claims of those members who left us during 2020 open enrollment were very very high relative to the average uh around to my recollection um more than 20 percent higher than the average some closer to 25 percent okay thank you um going to exhibit one page six okay the table it shows the cumulative losses and you had seven point four million and I believe as we were talking there was one adjustment you had um that wasn't reflected in here that was about three million or something that would have reduced this is that correct um yes so we uh yeah it was three point seven million dollars for the 2020 risk adjustment true up we had assumed that we would be getting around uh 18 million dollars in a risk adjustment transfer from MVP and in fact we got a little over 21 okay and then to the footnote for the risk quarter receivables that are not included um for apples to apples shouldn't that be included as well so that that nine million well it depends on what you want to use the table for um so if you want to use the table for what has this uh business what's been the bottom line impact to blue cross I think it's important to include that 10 million as well yeah so right okay so if we add that in then we end up that over time uh blue cross has had uh you know blue cross reserves have increased by about three million dollars over the full history of the aca market of course that's well short of the increase that would have been required to maintain rbc um I decided to keep it out of the table because I wanted to use the table to see you know kind of how did we do how do actual results compared to what we thought so that the table as constructed kind of shows us how accurate is our actuarial work and that that's what I was you know that was the main purpose of what I wanted to convey in the table but I do agree 100 percent that if you want to use the table to say well what's been the bottom line impact to blue cross over time we did lose the seven million dollars but the government was good enough to to refund us um a total of 10 million dollars of that so in total uh our reserves will have gone up by about three million and isn't that really what the purpose of kind of that risk adjustment is right because if you had the less healthier population I mean we're just kind of um looking at the marketplace and making sure that you know there's adjustments for that correct well let me let me clarify so the the um the 3.7 million that we didn't include in 2020 is because that 3.7 arose after the time we submitted the filing and therefore submit put this chart together so that risk adjustment true ups for all the previous years are part of the chart that's kind of part of the the the annual process we we make an estimate of what we think we're going to receive at the end of the day we get a number that's in part based on uh MVP's population and uh that's part of the experience so that's always in here risk corridors are a little different risk because risk corridors basically said you know it was the federal government saying tell us how you did in this market and if you did well we want a piece of that and if you did poorly then we will actually refund you a portion of the amount by which you did poorly and so that that was kind of completely to me it was separate it was sort of a below the line adjustment so if I want to see how you know how did I do relative to to my prediction I'm not going to include that because it's kind of below the line the fact is we lost that money um and then the subsequent fact is the government was was kind enough to to repay us for some of those losses does that make sense yeah what we just said was 3 million is what the gain would have been for this book of business from 2014 through 2020 um with all the adjustments that the Green Mountain Care Board has imposed it yeah if if we include the the 10 million so I'd say it a little bit differently I'd say there was a 7 million dollar loss over seven years but we were refunded 10 million dollars of that loss the reason 10 is bigger than seven is because we did have some gains in there over time as well um but the federal government refunded 10 million of the experienced 7 million dollar loss and then on top of what impacts RBC would be gains on investments or losses on investments correct absolutely for the RBC um okay and then um in your testimony um you stated that RBC depleted must be replenished in future years by rate payers yeah that's that's really the mechanism that we have at our disposal you know being a being a nonprofit we're not able to um really raise capital in in other ways um there are a few recourses available to us in case of an emergency we may be able to get a surplus note by way of example um but by and large uh the means that we have at our disposal to increase surplus is by charging premiums okay um and then on exhibit 15 page 3 which I believe is all admissible and Mike if you can just check yes that's not marked as confidential okay um can you can you look at the RBC table and tell us what the two biggest impacts were that brought down RBC from 2019 to 2020 yes so we have an impact of change in pension funded status due to Alion's investment losses that reduced RBC by 163 percentage points and the impact of change in pension funded status due to impact of year-end actuarial assumptions uh further reduced RBC by 59 percentage points anything in dollars that translates to about 45 million or so I think it was 35 for the 163 and and then another 10 or so for the sounds about right okay um and I know a lot more of this discussion will be in the private session but um last year there was testimony to state that the pension plan would not impact rate holders um yet we just talked about if we deplete the RBC it must be replenished in future years by ratepayers so I know we're going to get more into that discussion but um you know I do think it's important to be on record to show what happened to the RBC um both from the ACA marketplace which we just said was a benefit of about three million dollars over a five-year time period and this is about a 45 million dollar hit to RBC um for those two components um that drastically reduced um where the RBC is and hadn't had those not reduced I think we may be in a different position as to what we would do with RBC because we certainly wouldn't be asking the ratepayers to replenish that which is ultimately what's going to happen but um I know we're going to get more into that when we talk with Ruth and when we go into um separate section but I I did want to make sure that was um highlighted but um I'm done thanks okay Mr Chair thank you um good morning mr Schultz morning are you the right person to ask a question about the um question of um the contractual arrangements with optum versus your previous pharmaceutical benefit manager or would that be left for miss green I I think detailed questions would would have to be uh done confidentially um and I I believe either one of us could answer at a high level those questions I'm not sure if if miss green has the detail on them or not times of the question I guess you can answer at a high level I'm going to ask you the question and then you can tell me if uh it should be deferred sounds good okay so do you have concerns about the impact of um this change um on Vermont pharmacies uh no I do not okay in your testimony you talked about the fact that uh the the savings were primarily driven by rebates that's correct yeah that's correct and that's why I gave the answer to the pharmacy question the savings are indeed primarily driven by enhanced rebates and that uh that's neutral to the pharmacies that impacts the manufacturers themselves which I think is who we would most like to impact in order to participate in the uh um plan pharmacies can't reject specific prescriptions correct they have to fill all I don't know that contractual detail to be quite honest with you okay would it surprise you to um learn um that uh I was given copies of um the actual pharmacy reimbursement for the same drug diet diazoxide 50 milligram same days of disbursement um the uh starting costs were about 1497 under um your previous PBM that pharmacy was reimbursed um 1186 51 under your current PBM that pharmacy is being reimbursed 702 28 which they claim to be a loss and they are making the argument that a handful of Vermont pharmacies will be closing this year because of these type of things would that's would that surprise you am I getting false information I I have no idea to be quite honest with you I I can't speak to that level of detail for that specific drug I'm not sure um I'm not sure how specific drugs may be reimbursed for for one PBM relative to the other I do know there there are certainly changes um that are made in those contractual arrangements so I would imagine that that some for some drugs there that they may well be uh reimbursed more and for others they it's likely that it's less so I um but beyond that I really can't speak to the specifics okay are you aware if there's any type of clause in the contract that would um prohibit um optum um in their own mail order business from being reimbursed higher than a Vermont pharmacy I am I am not aware uh of that specifically no I'm not aware of it okay so yeah any further questions about like contract details I think probably would be best for an executive session and I was planning on dropping it there anyways um on that topic uh and I had hoped not to have to ask any questions today but um in the words of the immortal great yogi bearer it's deja vu all over again because we've had this conversation at past rate review hearings and once again I'm forced to bring it up um you've made the assertion that any um past reductions in your rate has just been deferred reductions and it has to be put in future rates and so is it your testimony that blue cross has maximized their ability to coordinate care we we have we have uh we're constraining costs the best of our abilities in working in conjection with our providers so have you maximized your ability to um manage those with chronic illnesses I give the same answer again we we are we're doing the best we can with the tools we're able to work with do you believe that um you have maximized your complete efficiency and effectiveness and the ability to um uh deliver insurance to uh Vermonters I think there's always room for continuous improvement chairman there we go I love that answer so given that answer and the fact that you have continually lost market share in each of the years that you've come before us in this particular group of business how would one assume that you have reached true maximum efficiency and effectiveness in that any rate reductions result only in deferred rates to Vermonters well I would revert back to the answer that I gave about whether this you know helps us in terms of of competitive position if we if you our rates are reduced we need to have surplus available in order to make investments we need to have surplus available in order to serve Vermonters when they want our coverage and Ms. Green will testify to this in greater detail but last time our rates were this close to parity we had an 87 percent market share if our market share went up that much this year RBC would be depleted dramatically and very quickly and Ms. Green will be able to testify to the details so I agree with you Will Cross is working hard every day to make sure that we're delivering cost at the most affordable way to Vermonters we've included millions of dollars tens of millions of dollars in this rate filing through Vermont Blue RX through making decisions to fund certain items out of reserves to make sure that we get that premium relief to Vermonters so I you know I I'd agree that yes it's something that we work on every day and we will continue to do so but I also want to point out that we need to have the capital available in order to make those investments if all we're doing is treading water just to stay afloat we don't necessarily have the resources that we need to invest in the types of initiatives that we need to to actually bend the cost curve in Vermont rate reductions don't change the cost of care in Vermont we need to initiate programming work with providers in a way that allows us to do so and to do that we need capital so when capital is depleted that actually stands in the way of us working on the types of initiatives we need to work on in order to actually bend the cost curve and deliver premium relief not just on a one-year basis but ongoing into the future did any regulatory decision by any governmental body force you to place your investments in the pension where you place them I'm not close to that but I'm going to say no the answer is no there is no enforcement of us putting our investments in any one place okay thank you I guess one more point before I cease my questions and that is you seem to be making the argument both in your pre-file testimony and your testimony this morning that any reduction will leave federal dollars on the table does the end justify the means well let me specify any reduction in the individual market now that we have a market split will leave federal dollars on the table you know I gave you the facts and I think you'll have to make that decision if you're asking me if I were to make that decision I would value lower net premiums for lower income Vermonters over lower premiums for high income Vermonters and 80 cents on the dollar benefit to the federal government that's just Paul's opinion and you know we as Blue Cross are recommending that the board actually make that decision as well we think as a company that's the right place to be you'll have to make your own mind up but yes I would advise you that we should value the net premiums of those lower income Vermonters over helping the federal government what has Blue Cross's historical practice been when it comes to taking the approved rates and putting them into your pricing tables accordingly by each of the different plans whether they be bronze silver gold platinum is it a flat across the board change that you make no each plan is rated on its own thank you very much no further questions Mike I have one follow-up yeah and then Jess if you had any I think you deferred go ahead Robin uh so Mr. Schultz would you value lower net premiums to Vermonters higher or lower than lower net net premiums to small businesses and small group employees that that's kind of an impossible question to answer I don't know that I have an answer but I will point out that there are different they're in different dockets now so to the best of my understanding of the rules what you do in one doesn't have to be the same as what you do in another except you did verify earlier that some of the factors apply to both markets didn't you that they are independent factors yes we came up we developed factors and the same trend for example might apply to both markets but they are you know each each filing stands on its own merits I'm not you know I'm trying not to say go whack our small group rates and leave the individual alone that's I'm certainly not making that argument we we feel that we've already provided tens of millions of dollars of rate relief to this market and that you don't need to take that step on our behalf because we've already taken it however you you also just testified that if the board made a decision that was outside of an actuarial recommendation that that results in an underfunded premium and so I would just note that there are actuarial factors which apply to both markets in both your filing and MVP's filing and that consistency where that is actually recommended seems prudent so I have no further questions member Holmes do you have any questions I guess I just want to circle a little bit back to the conversation around declines in RBC must be paid by ratepayers I think you're hearing a lot of board questioning around this and I understand the need for capital to make investments and I understand the need for surplus I just want to ask you whether or not that increase in surplus or that attempt to build much needed capital could also be generated by more effective utilization review by your clinical team elimination of low value care through you know utilization management and care management better stronger fraud waste and abuse monitoring negotiating with providers and contracting to ensure that there's less variation in pricing across hospitals across providers and sure that care is delivered in the right place improvements and administrative efficiencies whether that's staffing ratios introduction of technology things like that and also growth and investment income all of those things would also increase surplus right and to some degree are also in the control of blue prosperity yet yes you seem to be suggesting that we should file rates or have the rates approved that are in fact in excess of what we need and then go about these things and generate gains and I you know I I think I can answer that in in one of two ways one is that we do embark on those activities and they are already included in the rates so we are assuming for example that our fraud waste and abuse efforts will be able to return to the very high level that they were in 2019 there's no guarantee of that but that's included in rates we have introduced Vermont blue rx and so we through that programming and you know it's not just contracting and contracting and programming we will be able to reduce premiums and that is already reflected in our rates and so you know I we do put it in there right it's it's already in there and can we do more and create gains that's kind of the second way I'll answer it sometimes we do have gains and we've you know people you know it's been our gains in 2020 have been pointed out as if it's some some sort of horrible thing and I I want to point out that because we have those gains we're able to reinvest that in lowering rates in two different ways one is we had gains we concluded that they were in part because of a morbidity shift and we're assuming that that same population will persist through 2022 so that's part of why we're decreasing rates the other part is because we had those gains surplus increased and we're able to invest the 11.9 million dollars that I mentioned earlier in terms of keeping things out of these premiums that we expect to have to pay in 2022 so that 2020 gain is not some sort of horrible thing and we have demonstrated that we you know this this is our track record if we have a gain like that we put it into rates we return it to rate payers that's the only reason we exist that's the only reason policyholder reserves exist they're for the rate payers they mitigate future rate increases we're not we're not giving money to wall street it all goes to policyholder reserves and and you can see in this filing particularly that we are using that money wisely to decrease premiums for 2022 and I think that's exactly the result all of us want I understand I just it sounded from your testimony that the only way to replenish reserves and ensure capital and surplus was through premiums and I guess I was wanting to articulate that I think there are multiple ways to do that I don't disagree that a CTR is important but there are multiple ways to replenish reserves that's all I had Mr. Anafio did you have redirect for Paul no further questions thank you thank you so the plan that the parties and I had discussed was that we take Jackie Lee's testimony next I don't expect that would take very long but you know I was given kind of the new issue with respect to DFR the recent report the potential that that's going to come up I'd like at least an hour and a half for the commissioner in Zach Smith from Oliver Wyman so I don't think well I think Jackie's testimony would probably be quick I imagine I don't think it's going to be half an hour quick so I would propose we hear from the commissioner about the solvency report and and then probably take a lunch break does either party have any objection to that plan just a question go ahead Mike I was just going to say we have no objection go ahead Mr. Anafio Mr. hearing officer just a question then when would we get to the discussion of the RBC issue with Mr. Schultz and then Ms. Green may I offer a suggestion since that's likely to come up in Ms. Green's testimony as well perhaps and Mr. Schultz I believe is with us for the day we could do that in a single executive session you know kind of perhaps after Ms. Green's public testimony yes I think that makes sense with the understanding that we are not going to have Zach Smith from Oliver Wyman with us any longer at that point so if there are questions for him regarding the confidential RBC stuff we might need to go into a mini executive session there before we before we break Mr. hearing officer my only concern is that we had enough time to go over the RBC issue carefully and maybe it makes sense and maybe it would cut time if we did Ms. Green and Mr. Schultz together regarding the RBC issue I think that was what Mr. Anafio proposed and my did I misunderstand that that's correct good well that's a I think that's a great proposal okay so why don't we break for eight minutes reconvene at 11 and I see I did see the commissioner was on commissioner are you still with us yes everybody hi so I think we're going to break for seven minutes come back at 11 and we'll hear your testimony is that makes sense everybody okay thanks everyone but Bridget or Mike are you one of you on maybe you can ask them again Mike yeah thanks Bridget or Mike are you are you with us if you're speaking you're you're on you I see Mr. Anafio putting on his glasses and everything if he could just acknowledge that he's there so the hearing officer can continue can I apologize I didn't realize that question was to me I'm here sorry about that worries are you prepared to begin uh yes okay and Miss Sears you're with us correct I am thank you okay so we are back on record in uh the hearing regarding Blue Cross Blue Shield of Vermont's 2022 individual and small group rate filings we just finished the testimony of Blue Cross's actuary Paul Schultz and now we are going to hear from Commissioner of Department of Financial Regulation my paycheck and there is an actuary from Oliver Wyman also on the line is it Zach Smith or Zachary Smith Zach it's great thanks and at this time I'd ask that you please both raise your right hand uh so I can give you the oath do you swear or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth yes I do okay you can proceed well thank you very much Mr. Hearing Officer and good morning everybody and thank you for the opportunity to testify today I just have some brief remarks that lead into our testimony and then certainly interested in answering questions that that everyone has the Hearing Officer introduced Zach Smith just to reiterate he's a senior consultant at Oliver Wyman he's been working with us for a number of years on projects relating to the right hearing and not related to the right hearing he's very familiar with Blue Cross Blue Shield as a result of that and again we used Oliver Wyman in connection with our solvency opinion this year this is something that we've recently done and it really just speaks to the fact you know we started doing it when there was great uncertainty in health insurance caused by different changes that were happening at the federal level under the previous federal administration and we continued that through COVID because obviously there is a tremendous amount of uncertainty and upheaval as a result of COVID as well so we're very thankful that they participated with us again in our solvency opinion and provided some analysis as well and hopefully the board finds that useful and valuable also at the top I just wanted to mention in connection with the pandemic Blue Cross Blue Shield has been a real partner with us throughout the pandemic as have many other industry stakeholders but since Blue Cross Blue Shield is being discussed today we've developed you know a number of emergency rules bulletins Blue Cross Blue Shield was always very helpful in that process a number of those rules and bulletins you know did result in a financial impact for them and other carriers in terms of providing COVID specific relief to volunteers and that work was critical during the pandemic particularly the early parts of the pandemic and like I said they were a willing and able partner and really appreciate that and some of that impact is being seen in the financial results and in the returns that we'll talk about today so I think it does have a direct relevant impact. I'll just mention again you know just a really high level about RBC risk-based capital I think the board is very familiar with it at this point but that obviously is one of the main measurements we use to determine the financial position of an entity whether it's a health insurer or some other type of health some other type of insurer in Vermont and and it's different based on whether you're a health insurer or property casualty insurer or a life insurer and the different factors are taken into consideration but it is a uniform approach that our department and all the other insurance commissioners across the country use determine you know the solvency risk the solvency position of an entity any other questions the board has happy to talk more about that but I think as you saw from the solvency opinion that we provided you know Blue Cross Blue Shield is below the the 590 to 745 range that the department established a number of years ago when Blue Cross Blue Shield started and then the department sort of you know did its own independent analysis about what's an appropriate RBC range for the company based on its unique considerations so it is below that range you know I think all things being equal if it was where it currently sits and there weren't a few things around the corner that we're going to have a favorable impact on their financials we would have even greater concern about its current position its RBC is lower than it has been in recent history it's certainly lower than last year last year looked like maybe a start of a nice trend where it was sort of moving up to the range and and you know albeit at the lower end of the range but as you can see from the financial opinion in the solvency opinion there are a few items that are certain they're certainly going to happen it's just a matter of timing that will have a favorable impact to Blue Cross Blue Shield's RBC and that will likely occur in 2022 and during the rate filing 2021 but impact 2022 rate filing so you know there are other things though that are much less certain that associate with the rate and I just want to again caution or stress I should say that uncertainty some of that is directly tied to the pandemic you know there is again across the country and even in the region and uptick in ongoing infections the new Delta variant is the most you know the most current the most you know transmissible variant but there potentially could be others that provide even more challenges to to states and and the health care industry as a whole certainly there were changes in people's participation in health care in morbidity due to deferred or foregone care that may impact health insurers into the future we just don't know about that and then there's also some uncertainty in the margin within the rates that are filed before you today I think everyone understands that there was a favorable impact in 2020 in terms of financial impact to Blue Cross in 2021 whether based on actual data we have to date or and and on projections it does appear like there will be a negative impact in 2021 and you know that was again directly due to some COVID impact but the favorable impact in 2020 that Blue Cross Blue Shield believes is due to improved morbidity you know has been carried through into the rate filing if that turns out not to be an improvement in morbidity but an improvement in you know some other temporary or some other you know one-time impact then the rate actually might be on the lower end of what it needs to be because you know that improved morbidity wasn't as significant as Blue Cross Blue Shield believes that it is and again they followed that into the rate and it's reflected into the rate so that is some degree of uncertainty there as well I think it's an approach that benefits Vermont consumers so it's an approach that we don't have a concern with but I think again the board should just be aware that there is a degree of uncertainty as to how that plays out and and some of that is is based on factors that are beyond our control some of it are based on factors that are not we're not able to project at the moment and factors relating to the pandemic but you know again because that was followed through into the rate we don't take any objection to it so the bottom line is you know with the rates that are filed and with the financial projections that we have in front of us we do believe that Blue Cross Blue Shield will be above their range potentially in 2021 but when you factor in some impacts that are likely to happen or expected to happen I'll put it that way in 2022 they will be back within the range somewhere in the low medium end of that range so the the the rate that's filed here you know takes into account its need to keep up its surplus requirements it takes into account some of the trends that they're seeing both favorable and not so favorable and and like we said takes into account the fact that they've seen improved results recently that's followed through into the rate and these COVID impacts that they are experiencing whether due to you know emergency bulletins or regulations that our department put in place to try to help Vermonters and protect Vermonters or whether it's due to other pandemic related impacts you know those have been picked up by the surplus which certainly is an appropriate use of the surplus so you know I think as we say every year you know we you know based on based on the filing based on Oliver Wyman's review the rate is appears adequate it does not appear excessive and again any diversions from the rate as filed certainly we would want those to be actuarially supported because if they're not actuarially supported it could result in Blue Cross Blue Shield not meeting its surplus target for the year and could again in the long-term impact Vermont consumers so I'll leave it there and certainly happy to expand upon anything that I touched on or answer any questions as well. Thank you Blue Cross do you have any questions for the commissioner? Mr. Hearing officer we have no questions at this time I'd appreciate being able to reserve the right to circle back if anything arises in further testimony but at this point we have no questions. Mr. Angle. Yeah I do have a few questions and I want to make sure that I don't talk about anything publicly that is supposed to be non-public if you think that I'm getting close to the line please stop me I think I know where my line is but if I get too close to it please stop me. Good morning Mr. Commissioner. Good morning nice to see you. You too. You said that Blue Cross is going to be above the maximum RBC range that is above the maximum of your target range you're in 2021. Yeah that's correct I would add one bit of caveat to two caveats to that really one relating to 2020 one and one relating to 2022 relating to 2021 there like I mentioned there are certain known impacts you know there is a CSR payment there's a alternative minimum tax payment you know those are going to happen it's a matter of timing if only those things happen they will the company will only be within the range if some of the other expected things happen and again these are forecasted things happen in 2021 they would be likely above the range but again looking comprehensively over the next 18 months it's expected that they will then again see negative impacts in 2022 that would bring them back within the range not above the range. Okay and one of the conditions that reduces the RBC ratio is the impact of year-end actuarial assumptions in connection with the pension funded status do you understand you may not be able to answer this but do you know what that means you know what the difference in the actuarial assumptions is that causes the drop in RBC. Yeah for sure so I mean I think we mentioned that in 2020 they had a favorable statutory income so mostly derived from improved underwriting so that was like 13.2 million but there was a reduction in capital and that reduction in capital ended up being you know about 29 you know 29.9 million or something like that so with that positive 13.2 came a loss a realized loss from the pension that actually made the capital go down again by about 29.8 or 29.9 so that was realized in 2020 which obviously did have a significant impact on the RBC. And then there's another element that has to do with deficiency reserve accrual which very substantially reduces statutory RBC could you explain what that is yeah so I believe what that is and and I'm happy to have Zach add in if he has anything on this point but what I believe that is is looking ahead into the future year and understanding what they believe will be a negative impact from COVID and other factors and they are accounting for that currently in their financial statements. Okay and the um just one or two more questions you obviously you know as well as if not more than anyone how Blue Cross's business has decreased substantially over the past five years and MVPs has increased substantially could you explain why that is just in layman's terms. Yeah for sure so you know I think just again to take a broader view I mean there's a lot of Blue Cross Blue Shields business that is beyond the plans that we're talking about today whether that's in you know self-insured plans through employers whether that's through supplemental plans and the like so when you look at it holistically you know they have been quite stable I would say over the last five years. When you do look at the small and individual group they have been losing market share to MVP you could account for a number of reasons why that is I think probably consumers and small businesses move because of pricing I mean that's going to be the main motivating factor so just in layman's terms you know they might find the pricing to be more advantageous in MVP and and that's why you're seeing market market share move away. Other factors certainly could be consumer or sorry customer assistance but Blue Cross Blue Shield certainly has a very strong record in our opinion on those types of customer assistance issues so there are other factors as well but again I would think price would be the main the main reason. Very good thank you Mr. Commissioner that's all the questions I have. Do any board members have questions for the commissioner? I have a question. My question is that you know I understand that Blue Cross is at 480 RBC as of 1231 yet they had you know two major adjustments due to the pension and they would have been at 702 had those not occurred and clearly those were extraordinary so how do you think about I know you said you know they're kind of at the low end and if we didn't have all these other things coming forward some additional credits that didn't happen and maybe the year we thought they would you know you would be pretty concerned yet the big hit to their RBC was these pension issues that really weren't you know the underlying performance of the business so you know how do we think about ratepayers having to pay for that because have they not been in the number we would have been at 700 so you know on the higher end towards the higher end of the range and we're not yeah and with some of these one-time adjustments we would have been above that so yeah no it's a great question so so I think the way I would think of it at the moment is I would say nothing is certain in terms of that pension issue I would say it's a matter of at this point timing and why I say that is you know some of those losses obviously had to be reflected in the current 2020 financial statements that had an RBC impact no doubt but it's not a the issue is not over I mean there is active litigation that you know I won't go into in great detail but there's active litigation from the Blue Cross Blue Shield National you know pension group there are a number of other pension groups across the country that have filed litigation against Allianz the Teamsters Labor Union the MTA teachers teachers pension funds so there's ongoing litigation that you know is a live issue and we'll see how that results it probably will be a number of years until it's resolved there's a lot of money being discussed but you know on that litigation issue I would I would prefer to be on the plaintiff side of the position than the defendant side I'll just say that and we'll see how that plays out and we'll see what kind of result settles from that so I think that needs to be factored in and then you know basically instead of that being here and now in real dollars we have to sort of wonder what it will be in some future year but hopefully that impact will be felt by the company and and that ultimately should benefit ratepayers as well okay thank you um I don't have any additional questions do any other board members have questions for the commissioner or mr smith sure I'll jump in Mike commissioner p check um I'm sure that uh Jesse Lucia reported back uh after Monday's hearing that um I expressed some frustration over the length of time it took for the report that was prepared on um possible rate rebates you know Governor Scott tasked DFR on January 7th is it uh was the release just last the end of last week due to um a delay that Oliver Wyman created or was there internal um discussions about the conclusions yeah so I would say the reason was was neither of those I mean uh you know we we did uh you know get the directive from the governor on on on January 7th to look into this issue and uh we put out um a request for data from to the carriers they uh responded it was a lot of work for them to respond they will will say that Oliver Wyman did a tremendous amount of work in February as did our department and um as is alluded to in the report we came to some initial conclusions on March 1st which is when the governor wanted us to report back to him and uh you know unfortunately on March 1st the report um said there was just too much uncertainty we certainly saw that all of the carriers had benefited in 2020 from COVID from a direct COVID impact but there was sort of wild speculation as to what would happen in 2021 I believe the overall range in terms of the impact was on the low end a negative a slight negative impact uh up to a $50 million favorable impact so the range was was extensive and we couldn't make any definitive determinations at that time so what we said that we wanted to do was get some actual 2021 data um and then uh you know take some of that uncertainty off the table and then see if we could make any definitive decisions at that time so we decided to wait until June to to re-examine the report uh we were able to get actual data through the end of April um that data came in you know end of May early June Oliver Wyman again worked really um really uh significantly uh for for quite a period of time weekends holidays nights all that sort of thing and as did members of our team as well and we wanted to get it done as quickly as possible we wanted to get it done before the raid hearings we thought it might have some value to the board um into the discussions and basically when it was done um that was as soon as we possibly could have done the analysis and and made some definitive conclusions so uh certainly I wish it could have been earlier but it would have been it would have been irresponsible and unwise for us to make any definitive conclusions before um we got that data in 2021 and had time to analyze it uh this month one of the things I'm hoping that you can elaborate on a little bit is um having read the report um maybe you could explain to me how it's okay to in some circumstances say that a rebate is appropriate in another circumstances say that uh because of uh anticipated rate filings that the Vermont consumer will benefit that way if your opinion is that the Vermont consumer would benefit and future rate filings why wouldn't that have been consistent across all plans well I think every every you're saying you're talking about all carriers or all plans that blew cross all carriers all carriers yeah so every carrier had a different experience you know from from the pandemic um for example MVP but those that you came to the conclusion um that um there there was some some surplus created um so for example um you have a different recommendation for um an MA plan and with this particular carrier than you do for the individual and small group and I'm just it seems to I'm struggling with what I see as some inconsistency there yeah sure so we don't do that as inconsistency the you know the the supplemental plan that you mentioned uh you know it had an over Wyman's determination a positive a favorable impact from COVID there was also profitability in that plan above and beyond the target above and beyond the COVID impact so it was a profitable market segment that had identified COVID impact so we thought consumer relief was certainly warranted there and addressed look across to incorporate that into their upcoming filings that we'll see in the next month or two in the small group individual marketplace there was also a favorable you know financial impact there was disagreement between to a degree there was disagreement between Oliver Wyman and Blue Cross Blue Shield as to whether that was improved morbidity whether that was improved health outcomes or whether it was more attributable to a one-time COVID impact Blue Cross Blue Shield was of the opinion that that was due to improved morbidity rather than a one-time COVID impact and reflected that into their rates now if we were to to say you know we disagree and we think it's a one-time COVID impact the rates would be higher although there would be a one-time consumer credit that would be allowed to to consumers so if Oliver Wyman is right that maybe there was a bigger impact than Blue Cross filed for you know then it's a de facto premium credit because Vermonters are going to benefit from those lower rates if Blue Cross Blue Shield you know turns out to be correct that it was improved morbidity more than a one-time COVID impact than no premium relief was warranted and and you know and the right decision was made as well so I think you know each of those marketplace is a little bit different and the situation is a little bit different but but we think they are consistent outcomes within Blue Cross and within within all of the other carriers as well I'd just like to add a couple of points to the points that Mike made you know regarding the Medicare supplement business most of the COVID costs were generally borne by the federal government and not by the plans which is you know unique to Medicare supplements and other Medicare products and you know was not the case in the individual small group marketplace where most of the COVID costs were borne by Blue Cross so therefore you wouldn't see the you know a significant portion of the expected cost increase in 2021 are due to the return of deferred care from 2020 which is limited by the limited benefit of the Medicare supplement plan as well as ongoing treatment costs diagnostic testing costs and vaccine costs which were largely which would largely be borne by the federal government so that's why we believe that the Medicare supplement gains from 2020 were largely locked in and therefore our recommendation to provide a credit was consistent with the expectation that there wouldn't be significant losses to counter or some losses to counteract the gains somewhat of 2021 to counteract the gains from 2020. In the individual small group market as the commissioner mentioned our largest concern in trying to parse out the impact due to COVID and the impact due to the favorable morbidity was the fact that this favorable morbidity was largely being there was only two months worth of data of a sort of normal run rate just January and February 2020 in order to really try to parse out that favorable morbidity you know obviously we didn't have you know as sophisticated data as Blue Cross did but we just wanted to kind of be a little bit more conservative in the belief that there was a significant improvement in the overall population morbidity and therefore attribute more of you know our belief was that potentially more of the the impact of COVID might have been more favorable than what Blue Cross has estimated in in their own modeling however like Mike mentioned if the impact due to COVID over the two-year period was more favorable due to COVID and this morbidity improvement you know is less than Blue Cross had estimated than you know presumably the marketplace in 2022 will have increased morbidity then projected and therefore the rates you know could be higher if you had believed that the morbidity if the COVID impact was more of a one-time thing and the population morbidity you know wasn't as favorable as estimated. This is a picky you in question commissioner but in the report there's language that said that you'll be looking at other supplement plans and it says Medicaid should that have said Medicare supplement plans? Yeah Medicare supplemental Medicare supplement. So are you looking at like UnitedHealth and plans like that? Yeah exactly right so you know the report the you know we set out when we set out to find the parameters of the report we looked at basically the the carriers that that provide you know the provide the most care in Vermont the ones based here the or SIGNA for example or MVP that do a business here and and when the report led us to the fact that the Medicare supplement appeared to have a favorable COVID impact that made us say well wait a minute what are the other plans here that we didn't include in this initial report and that would be UnitedHealth group and that and I think are the two big Medicare supplement plans so we we do have their rates and we plan to have Oliver Wyman work with us to assess out whether there was any additional whether there's any additional COVID impact or COVID relief that's not already accounted for in their rates that should be warranted. Thank you those are my only questions. I think I just have one quick question commissioner P-check how are you doing? That was good how are you? Good fair enough. I want to thank you for the careful analysis that both you and Oliver Wyman did it's really helpful. My question is actually more long range than specific to this particular filing but I think your answer would be important. I'm wondering if you see Vermont's efforts and indeed actually as we heard testimony this morning Blue Cross Blue Shield's efforts to move towards more fixed prospective payment as a mechanism to reduce pay risk and uncertainty and potentially reduce pressure on CTR potentially reduce administrative costs if there's fewer you know claims transactions happening if it's rather a fixed payment is that a mechanism to reduce premiums going forward and reduce CTR needs reduce administrative costs? Yeah so it's a great question so I mean on the risk piece of that question you know certainly the more risk that is shared it's not solely on the payer the less volatility the payer is going to experience the less need for maybe for as much capital requirements as there have been in the past maybe the maybe less need for the same contribution to reserves or surplus that there was in the past of 1.5 target maybe that's a lower target maybe you know maybe that you know anyway so there's so all of that is true I think the administrative cost certainly is a good a good example as well there's just less claims management and that obviously is expensive and time-consuming so I think all of that is a fair representation of what you know what I think the upside is over the next few you know let's call it five years as you move to more fixed uh fixed payment structure um so you know I think there's will they will they reduce premiums I mean I you know they won't I think it's fair to say that hopefully it will have a favorable impact on the rates that either they won't go up by as much as they would have otherwise or they will stay flat or maybe they'll go down but I think it'll have a favorable impact on the rate certainly. So with that in mind is there a plan or is there a trigger amount of contracts that are in fixed perspective payment that DFR would see and then revisit the RBC range that you've just recently estimated for Blue Cross Blue Shield downward? Yeah I know it's a great question um so I'm trying to remember if I don't think we said in the report that we would do it every three years maybe we did the initial report I thought it was every five years that we were we would re-examine Blue Cross generally even you know separate from this issue that we're talking about now just to see what its risk profile was and what it's appropriate you know range would be um so I think I think it was five years so that's probably coming up in about two years so I think you know regardless of what percentage they're at at that point I think that's an appropriate time to look at the risk profile generally and that would be part of the analysis as well but I wouldn't I don't maybe there's a target in terms of percentage of business that is on the fixed schedule that that we can think about a little bit more but certainly at some point in time the risk profile will change and that should be reflected in the in the RBC range and the analysis that we've done. And then my final question is given what we know about you know fixed perspective payment having this for example potential impact on slowing premium you know premium growth but also having a potential to improve delivery system reform efforts you know in terms of shifting you know care towards preventative care and away from some of the volume driven you know potentially curative care I'm wondering are there any things that DFR can do to and send more fixed perspective payment contracts and just in your portfolio your regulatory levers is or anything we're thinking about what the remat and care board can do I mean so my question is what can DFR do in this regard? Yeah it's probably a question that we should think about in a little bit more detail and happy to respond to the full board and a written response following up on this but you know I would say at this point we are our department is engaged on the issue with the impacted carriers and certainly encouraging and willing to work with them on any challenges they face that are within DFR's jurisdiction so I wouldn't say we have been you know creating incentives or or sticks or carrots or what not but we certainly have been engaged and when there is a challenge we certainly are willing to work and try to alleviate that again if it's within our jurisdiction I think oftentimes these issues aren't but there may very well be broader opportunities for us to be more to be more engaged in the marketplace and happy to happy to think about that more and respond. I would really appreciate that thank you very much and I think just a sorry I think the just the the board you know I think the last piece where you mentioned you know actually seeing the reduction in cost of care is the is the critical piece there at the second part of your question because you know we mentioned how it might impact insurance premiums by shifting the risk and whatnot but unless you're getting those better health outcomes you know the cost is still there it's just moving to some other part of the health care structure but you know I think you know not in my first answer I was just focusing on the insurance fees right so you know that that is the risk I guess and you're well aware of that but but again that's the hope is that it actually pushes down not not just shift the risk and and sort of have a have a sort of a you know on paper impact but that actually improves the the health outcomes and the and the risk of the health risk of the population at all any further questions from the board members Mr. Inafrio you had wanted an opportunity to follow up do you have any questions I don't thank you for circling back okay then I'll excuse the commissioner and Mr. Smith thank you for your testimony yeah thank you very much I guess we are close to a reasonable lunch break like I mentioned before I also don't expect Jackie's testimony to take a long time I would assume unless one of the parties telling me differently we could do that get through that probably before one does anybody including board members have a preference for breaking now or seeing if we can get through Jackie's testimony and then break for lunch depending on how the parties respond I would rather get through Jackie that's fine with me Mr. Chair same stuff that works for me thank you and why don't we do that Miss Bellova are you prepared for that yes certainly um everyone can hear me okay we can Jackie could you please raise your right hand do you swear or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth I do okay thank you go ahead Miss Bellova can you please state your name for the record Jacqueline Lee and where do you work I work at Lewis and Ellis and what is your position at Lewis and Ellis I am a vice president and principal great can you please turn to exhibit 22 of the binder okay I am there and do you recognize exhibit 22 yes this is my prefiled testimony okay can you briefly describe the information contained in this document yes it gives a background of my professional background background about Lewis and Ellis and our experience doing rate reviews our experience in the state of Vermont specifically and our experience with healthcare reform issues it also dives into our standard of review how we go about our review process and how we get information from the carriers and then outlines that we issue a formal report to the board that becomes part of this hearing today okay is the information in this document accurate and correct to the best of your knowledge yes it is is there any information in this document you would like to change or clarify at this time no there is not do you wish to adopt this prefiled testimony as part of your testimony today I do and can you briefly explain your role in Ellen's review of this filing yes we work as a team on reviewing the filings Kevin Ruggeberg who is an FSA at our firm also helped do the primary review with working with Blue Cross and their actuaries to get answers to our inquiries Dave Dillon does an overall peer review of all of the filings and I fit in as an additional level of peer review where I'm more hands on between both carriers to ensure consistency between the two filings in this market and just ensure that we have we are able to answer any questions about the rate of filing for the board or for this hearing and then how do you submit your recommendations to the board we provide a report that is based on the URT which is a reporting tool that is federally prescribed for carriers to provide as part of their filing we utilize that as the backbone of our report to ensure that there's consistency and comparability between the two filings and you make specific recommendations to the board yes we do now your report is exhibit 16 could you please turn to that yes I am there and do you have any changes you wish to make to your report at this time I do not can you walk us through your standard of review please yes for standard of review it is outlined on page three of our report we follow what the board has been prescribed with doing which is reviewing the rates we stick to the actual components where we focus on the whether the rate is excessive inadequate or unfairly discriminatory all of those have been defined within my pre-filed testimony that we previously addressed and do you review for affordability we do not can you elaborate on that a little bit sure we do not do a review of affordability that is one of the requirements of the board but that's just not an actual item and not prescribed within the actual real standards of practice so this outside of our scope thanks using your methodology and standard of review did you make any recommendations to modify this proposal's filing yes we did they are on page 23 of exhibit of exhibit 16 we had four recommendations that have been outlined can you please discuss your recommendation about updating hospital budgets yes each year the hospital budgets as part of the hospital budget process with the green mountain care board submits budgets for approval and that occurs within our kind of timeframe of this filing but it is not known in advance when the carriers are submitting their rates nor when we are creating our report there's a window of time between the our report submission and the hearing that this comes out and they are actually ultimately approved after the rates are approved or ordered any orders are made by the board so we always um defer to if we get any new information after the report is submitted our report is submitted that we would be able to make those recommended changes based on those submissions and we have recommended that at this time too great and you have reviewed the other pre-file testimony in this proceeding yes I have and you've listened to the testimony today so far yes I have great I'm having reviewed the pre-file testimony and listened to the testimony today so far do you wish to amend or add to your recommendation about updated hospital budget information I don't have anything formal at this time we did agree with blue crosses methodology one of the key points of the submissions from the hospitals is that they are not typically um approved as submitted and so one of the actions that Mr. Schultz took when he was doing his review with his team of the new hospital budgets was to remove any excess requests to be more in line with what the board has submitted so we are performing that analysis and we will be providing an addendum to our report post hearing to address what the historical um declines have been or differences are between what was submitted and what was approved and we will work with the board to determine what um what we think was you know an actual and sound adjustment to for this for this particular component great now I'm moving to risk adjustment transfers could you please discuss your recommendation concerning that issue yes again this is another common recommendation that we make in each year the cms puts forth on june 30th of each year with the exception of 2020 the actual 20 calendar year 2020 risk transfers between the carriers in all throughout the nation that information is obviously comes after the submission by the carriers so what we do is we request that that information be considered and incorporated within the within the rate filing and and blue cross has agreed that that should be included as a change and um having reviewed the pre-filed testimony and listened to the testimony today so far do you wish to amend or add to your recommendation about the risk adjustment transfer I do not and now could you please discuss your recommendation concerning the update to the bronze CDHP cost sharing yes again after filing the IRS made a determination regarding the that impact of the standard bronze CDHP plan that resulted in a very minor change to that plan alone and does not have an overall impact on rates and that recommendation remains unchanged at this time great and now can you discuss your recommendation concerning the impact of ARPA on claims yes we asked of both carriers about the introduction of ARPA and how that would impact the morbidity of the population when we did so we got varying responses and so we decided to perform a market wide review of how ARPA would impact and we could determine the number of folks who are eligible within this population and as that population would be cut basically treated as a possible new entrant into the market we decided that in the event that we had some differences between the two carriers and the enrollment between the two of them that that would be handled and mostly accounted for within risk adjustment so we assume that both carriers would be impacted equally from a rating perspective and we performed an analysis which resulted in a decline of 0.2 percent in the individual market alone because it's the only segment that is impacted by ARPA and does that recommendation remain unchanged yes it does if your recommendations as of today are implemented do you believe that rates would be excessive no I do not do you believe they would be inadequate no I do not do you believe they would be unfairly discriminatory no I do not okay um I have no further questions at this time thank you thank you so much Mr. Danocchio or Ms. A.C. do you have questions for Ms. Leith? thank you very briefly just two questions um good morning Ms. Leith good morning as part of the work that you've been testifying about did you review Blue Cross's trend calculations um contained in the rate filing? yes we reviewed both medical and pharmacy trends and did you find them to be reasonable and appropriate? yes we did thank you nothing further Mr. Ango. Good morning Ms. Leith. Good morning Mr. Ango. On page two of your report uh the 2021 approved rate changes again that's that's that's 4.2 percent in the the bottom number in the third column that's approved that's not proposed correct that is correct and proposed was higher right I believe so yes okay and so just could you turn to page five uh in that chart there that says 20 actual over projected claims experience again that's based on the approved filing not the filed filing correct yes you're talking about the minus 8.3 for that component I'm sorry said again you're you're talking about the minus 8.3 on line one yes yes that is a comparison of the from the approved URT last year to what they are proposing this year and so that number would have been more negative had the uh had Blue Cross's filing been approved as filed correct yes um can you just go down to page line 12 changes and contributions to reserves you see the plus one there oh yes yeah do you have an estimate or just rule of thumb of how much difference in the rate a point of contribution to reserves makes um it's roughly a point one um there are some differences being it's an expense component but it's it's roughly the same oh okay so a percent of ctr is would raise the rate by percent yes okay and similar type of question uh do you have an estimate or a rule of thumb as to how much a point of ctr is worth in the rbc ratio how much it how much difference one point of ctr makes with respect to the rbc ratio uh the rbc ratio is a very uh complicated formula so i don't know that offhand suppose i know there's a range obviously that's the target range um by the department is there let's assume that uh Blue Cross's uh uh rbc was in the middle of target range which is 665 would you be able to give some kind of estimate assuming that that were there uh rbc an impact of assuming in the rbc and then assuming yeah assuming assuming that their rbc ratio is in the middle of the commissioner's target range which is 665 could you then given that could you give some kind of estimate as to how much a point of ctr is worth how much ctr would affect that uh rbc number again and it didn't i wasn't confused about kind of the starting point the rbc calculation is very complex and it has a lot of moving parts so i can't comment um to that at this time okay do you have any kind of range no i mean no there are there are lots of potential outcomes to that i would i would have to think about what that implies um and again this also is a small portion the rbc is not calculated um for just the individual and small group or qhp filings so that would also have to be considered in in within that response i get it um how about this can you give any estimate of how much a point of trend is worth in the rate filing um it is not a one to one um are you talking about total trend or yeah total trend um again it it's going to only impact claims um so it would only impact that portion um it therefore it's not impacting the expense portion of it so it wouldn't be a one to one it would be a little bit lesser than that roughly i guess you know 80 percent so you mean a point of trend would worth is would be worth about point eight in the rate or do i have that backwards no i think that's that's roughly accurate a point of trend is worth about point eight in the rate roughly one point zero of trend would be a zero point eight to the rate very good we understand each other thank you um what's the difference between utilization and intensity in connection with trend the difference between you utilization trend and intensity is that what you said yes um so utilization trend um typically hat is just how many services are happening over a period of time intensity trend is looking more at the types of services that are being rendered so um how i always think about it is are there more x-rays or are there more MRIs if you're moving more towards MRIs your your intensity trend is getting greater or if there are more complex procedures that you're moving towards uh that would increase your intensity you don't necessarily have more services you would just have more expensive ones okay um do you you've reviewed uh rate filings for several companies right yes okay and to all the companies whose rate filings you have reviewed include a separate factor for utilization and one separate factor for uh intensity um not all of them specifically call out intensity okay almost all of them have you all of them have utilization though could you turn please to page nine i'm there and you see there in the third paragraph under medical prescription trend you've got a the second sentence says that the referring to the 12.4 percent says that 12.4 percent is slightly higher than the approximately 10 annual increase observed between 2018 and 2020 you see that yes i do okay would it be unreasonable to use the 10 percent rather than the 12.4 percent i don't think it would be unreasonable i think as we've noted within this hearing today um there are also um there's a range of reasonable results so i think that would be within reason very good could you turn please to page 11 and this is a question on your along the same line you see the first uh the in the first full paragraph the first sentence states the 2020 increase in the number of claims was approximately 2.4 percent while the 2019 increase was 1.8 percent i see that yes would it be reasonable to use as a the assumed uh non-special to utilization trend which is discussed in that paragraph would it be reasonable to use a number in between those two in between 2.4 and 1.8 um just to confirm uh this is what a i don't want to sit here and read it um it what is this in sorry sure this is at the top of page 11 and uh the first full paragraph your conclusion is ellen he believes the chosen non-special to utilization trend of 3.0 percent is reasonable thank you what okay yes so it's for the non-specialty trend is that correct yes non-special okay sorry non-special to utilization trend um non-special to utilization trend um i don't know that i would i i definitely think it would be okay to be within that range i'm not sure i would go all the way down to 1.8 though given that 2020 is closer to 2.4 and there were other methods that were 3 to 4 percent so i think going down to 1.8 would be a little bit dangerous and outside of reasonable but i do think that it could be 2.4 slightly there below very good um and then in the next paragraph now you're talking about the unit cost for generic drugs and you say 3 per cent per year appears reasonable would uh the 2.6 percent which you say is over the last two years would that also be reasonable that would also be reasonable and in the next paragraph um you talk about a 10 10.3 percent i'm sorry you talk about a 10.3 percent average over the last two years for brand unit cost trend and you select a 10 percent and my only question there is did you go back and look at a third year for brand unit cost and if so you know what that was um i do not remember at this time i would have to look and i don't know what it is okay um could you turn to page 13 please okay and you see just about at the middle of the page you see the set the sentence it's the second sentence in the paragraph beginning it is expected you see there the sentence eleni assumes that this new population will be 10 percent healthier than the currently covered population yes i see that okay and and that's just that's within a range right it could be high or it could be lower yes it could what do you think would be the top of the of a reasonable range i'm not really sure i'm equipped to answer that question i'll give you you know i think when we were doing our testing um we looked at 20 and 30 percent um as as for healthier certainly that's going to vary very significantly by individual but um that was what we looked at and just decided that we would strike a balance of a conservative number that would be potentially achievable okay so 10 so 10 percent is a conservative number yes okay uh could you please go down to paragraph five and this is a quibble i i think there might be a typo but it also may be the case that i just misunderstand it and did you see that last paragraph there it starts with last year's filing yes okay and the first line says that the company assumed a seven a point seven percent increase in costs right that is that's what it says okay and then the next sentence says that the data suggests that not only was there not a seven point seven percent increase in cost there was a point one percent decrease in cost right yes okay and then in the next sentence you say replacing a point a positive point seven with a positive point one has a combined effect of uh point eight percent but you mean don't you that it's replacing a positive point seven with a negative point one right i believe that is correct yes that would make so blue cross was wrong both both about the size of the delta and the direction of the delta right say is that will you rephrase that please or ask that again yeah so but blue cross thought said there'd be an increase in fact there was a decrease oh um yes um i would note that um risk adjustment um does assist in making a correction there could you turn please to page 15 and in the first in the first paragraph below the chart you say that blue you note that blue cross applied an adjustment of four point seven percent to the 2020 experience do you see that yes i do is that the effect of covet or is that something else um i believe that is the impact of covet though i reserve that to be there might be some other pieces in there but i believe that is covet because we're talking about um then estimated estimating the impact of covet and that chart is really outlining 2020 and you can see the blue line having the dip during the um during the time of the shelter in place so covet very good continuing on that page paragraph eight changes to risk adjustment could you help me understand what year let's see let me ask it this way does does what you say in that paragraph that is the blue cross paid less in claims during 2020 than anticipated can i pause you can you tell me where you're at um 18 page yeah page no page 15 the same page we were we were my last question was on and it's just the next paragraph number three i'm sorry yes i'm in there now and is my understanding correct that the thrust of that paragraph eight is that blue cross received a double benefit that is that it paid less in claims during 2020 than anticipated and also received more in risk transfers than it did in 2019 yes that's what that says could you turn page please to page 18 and we're just about done i am on page 18 good um you see the first bullet that is labeled decreasing enrollment impact of decreasing enrollment yes okay and um the last sentence there is that rather than increasing administrative costs by 5.4 percent and administered across were increased by 3.8 percent yes i see that okay and is that because blue cross had less business or it is let me answer this way is that because blue cross is projecting less business in this year's rate filing than it did in last year's filing i know that they are have been experiencing decreased enrollment um i'm trying to remember if they i believe that they don't make a direct projection of future members um but they've been seeing decreased enrollment throughout this time period so i think it's more of a reflection of the decreased enrollment over time that they continue to have less than they than they than they have had in the past okay and so it's so it's reasonable to continue to uh assume an increase of minister an increase and in administrative costs based on continuing decreased enrollment for 2022 yes are you rick are you saying that i guess can you restate the question i'm not following what you're asking the that paragraph is entitled impact of decreasing enrollment and it's true isn't it then that the assumption in the rate filing is that enrollment will decrease correct yes from the base period thank you very much miss lee that's all the questions i have thank you all right now we'll go to questions starting with member pellin good afternoon jackie it's just it's become afternoon while you've been sitting there that's right um so i have one question um in is it standard procedure um in in in the actuarial world relative to uh hospital budgets the kind is to take a look at where those budgets might be prospectively where um a request for budget increase has been filed um but no decision has been made i mean in the vermont market that that happens in every rate uh filing that we've been a part of that there's been a submission but there's been no conclusion of as to that submission right but um but is the vermont approach a common approach outside of most the reason i made that caveat about vermont is there's very few states that have um hospital regulation okay and so um paul schultz this morning talked about you know looking at the requested increases for 2022 by hospitals and then factoring them back a little bit by some factor that that he determined um is a you know give some insight into the relationship between the the requested increases and the approved increases and i thought i heard you say that you were going to take a look back as well yes so will that be by hospital yes it will and how far back will you go uh i believe we'll go back as we've performed this every year and so i think we've done three or four years of this so it i think we'll end up going back four-ish years or so so it'll be a pretty long time period but we do take special note because since the board has changed over that time we do try to tend lean towards the more recent years when we're really making those determinations because the makeup of the board um impacts that particular change uh so so do you equally rate yes votes and no votes by board members absolutely everybody is important to you i'll look i'll look forward for your analysis thank you thank you very thank you very much thanks tom board member lunge do you have questions for jackie i do not board member usper i do not i do board member holmes i do not mr chair nor do i mr denafrio or miss ac anything further uh mr hearing officer may i have a one minute break to consult with miss ac on some potential redirect sure thank you i'm ready to proceed mr hearing officer when everybody else is we all are okay so do you have any follow-up questions just yes just a small handful thank you um miss lee mr angolf took you through a series of examples in um ellen's report and asked you whether lower assumptions than those chosen by blue cross might also be reasonable do you remember that yes i do is it also conceivable that in the in the course of you know put developing these rates blue cross might have chosen higher assumptions than the ones they chose and still remained within a reasonable range yes that's fair um i think it's also important to note that they should also be reviewed in the aggregate to make sure that the aggregate result is reasonable as well you anticipated my next question thank you um in terms in terms of thinking about aggregate results would it in your view um if a carrier were to choose the low end of the reasonable range for every single assumption throughout a filing is it likely that the that that rate would be reasonable when considered in in the aggregate um if you were to choose the low end of the range on every assumption it is likely that it would push towards becoming inadequate okay could you turn to um page 13 of your report which is exhibit 16 yes and the the last paragraph on that page you were asked some questions about that do you remember yes regarding the demographic shift that's right yes um so the there's a 0.7 percent increase that's referenced in that paragraph do you see that yes i do and is it your understanding that that 0.7 percent increase measured changes from 2019 to 2021 yes that is what that 0.7 represents okay and then that paragraph also references a 0.1 decrease right yes it does and that decrease is measuring changes from 2020 to 2022 right that's correct so those two numbers are measuring different things right yes they are different time periods okay and i think you got a question for mr angolf along the lines of so this this represents some sort of error on blue crosses part do you remember that yes but but it doesn't right it's those two numbers are referencing different things right they are referencing two to separate time periods okay thank you um just a couple more could you turn to exhibit one page 47 and let me know when you're there i am there so you see there's a table at the top and then some text yes would you please read the second sentence in the text below the table when projecting the 2022 enrollment we include the observed membership losses in 2021 projected organic growth in 2022 and expected growth due to additional subsidies from the american rescue plan and is expected impact on membership so so what blue crosses saying there is that in these rates they included additional enrollment from observed um 2021 enrollment right uh addition they assumed additional losses in 2021 and that that in turn lowers the admin charge right um i guess it generally yes but there are some fixed expenses that it would not fixed expenses would not if you had lesser enrollment sorry did i not answer your question i i um if i could if i could have another moment i may have garbled the question okay i apologize thank you that's okay apologies i it's it's difficult for a lawyer to to think like an actuary and i may have garbled the question um so my question returning your attention to to that sentence from page 47 um isn't it true that blue cross observed losses in 2021 right in membership yes yep sorry in membership but projected membership growth from 2021 to 2022 right yet organic and due to arpa yes and and and that that and what impact would that dynamic have on the admin charge so i mean i think it depends what how if the losses were overcome by growth but in general if you have membership growth your fixed expenses are going to be spread across across a wider base of people so membership growth would decrease admin costs if you have membership declines that fixed cost would not be among distributed among as many people so expenses would increase does that help yes and one final question just to clarify so so projected membership growth correlates to projected lowering of the admin charge that's correct yes okay thank you i have no further questions and i i appreciate everyone's indulgence on the the breaks mr aingov did you have anything further to i believe i want to eat lunch i have no questions okay thank you miss lee thank you so at this point i think it is a good time to take a lunch break i think in half an hour would be best since there's still a bit to go and when we return i understand we're going to hear from kate macintosh doctor kate macintosh is that correct mike and rigid i i think we may be hearing from ruth gree and when we return because of the switch in order and i think that's our expectation at this point okay good to know um and i expect that there will be an executive session associated with that testimony uh and in that we would uh invite paul uh in case there are questions for him so just be prepared for that um so why don't we break now and reconvene at one o'clock okay thank you thank you do you swear or affirm that the testimony you're about to give will be the truth the whole truth and nothing but the truth thank you miss ac would you please state your full name for the record ruth green miss green what is your position with blue cross blue shield of vermont i hold the position of charger and cfo would you please take a look at exhibit 19 in your binder yeah i'm there is that your prefiled testimony in this matter it is yes do you affirm that it is true and correct to the best of your knowledge i do does your prefiled testimony discuss matters related to blue cross blue shield of vermont's reserves its proposed contribution to reserves and the appropriateness of the proposed rates yes it does in your prefiled testimony including attachment c do you explain the basis for your decision to direct mr schultz to include a 1.5 percent contribution to reserves in the filed rates yes i do and in your prefiled testimony including attachment c do you discuss blue cross's current risk based capital or rbc outlook yes i do in the uh prefiled testimony we included a revised rbc outlook that incorporates changes that uh happened since the time of the filing in may in your opinion in the screen do the proposed rates satisfy the required criteria in terms of affordability ensure solvency promoting access to care and promoting quality care yes i believe they do are there any points you would like to highlight for the board with respect to these criteria yes there are a couple um one i wanted to focus on was just the affordability and access to care paul schultz and the the discussion that came earlier this morning covered a lot of that ground but i wanted to just bring us back to the point that the parties at these hearings have talked about affordability each and every year and this year is a bit different in the sense that we have the opportunity um through the arpa subsidies to have a big step forward in terms of affordability and i just wanted to um highlight that in addition to the blue cross the shield association advocating for the splitting of the market of the uh sorry of the arpa subsidies um we worked hard and in partnership with the health care advocate at the state level to additionally ensure that the legislature could find a way to separate the markets such that we could have the monitors benefit from the full the full value of the uh the federal subsidies so feel that together with a reduction in the small group rates the blue cross and also in the individual market enrollees in the blue cross individual plan the rate that they rate change that they will feel net of the subsidies as paul explained earlier is actually a decrease so we we really feel like that's a a significant step forward and there was a lot of people involved in that and we appreciate that i also just uh had in my um comments some notes in response to the board um wanting to know how the progress for the transition from direct and roll to the vermont health connect was going and i know robin asked that earlier paul and of course he was right on it was 506 as of last week um it is up over twice the amount that was uh directing the lease that it transferred over in the middle of june we've been partnering closely with diva to get the communications out there diva made the updates to their systems and we do expect that um pace of transferring over to increase steadily and we'll be working with diva to make sure that uh we continue to to work on that the 506 transfers over is about a 10 percent conversion rate if you will excuse me if you will for the blue cross book i don't know how the other i don't know how mvp is doing on that so um but with that with that said i i did want to draw draw out the importance of the affordability the other piece is uh with respect to quality the other criteria around quality health care and and value health value services blue cross bachelors vermont has continued and in um response to questions in this docket we've outlined the various things that we have been doing with respect to um value-based payment programs or other types of quality initiatives and i just wanted to draw attention to the fact that the point was made earlier that in order to continue that work and um be able to support those changes we do require the uh sufficient financial resources to do that so um clearly we're as the only vermont um domiciled or um health independent health culture in vermont um we want to make sure that we continue to partner with state regulators providers and other stakeholders to make sure that um we're able to achieve our our vision of a transformed health care system and we really need the financial resources to be able to continue to do that the screen continuing on the topic of affordability um is blue cross expecting to realize any gain in these markets in 2022 the um in 2022 the combination of our one and a half percent ctr and the um 11.9 million dollars that paul testified about earlier will result in no gain on this business in 2022 by virtue of the combination of the one and a half percent ctr offset by not including the covid related costs for vaccines tests and treatments in 2022 in rates and also by the reduction in um allocated um expenses to the segment and we'll continue to um focus on growing our market share and also supporting affordability by having that low cost of insurance um that is especially low as compared to other insurers are there any points regarding blue crosses solvency position that you would like to highlight the board yes so um i'm sure we're going to have a lot of conversations about that and we have had some so far but um we talk about solvency or i talk about solvency every year as um very very important our reserves are critical to our solvency and as uh commissioner p check has said that um solvency is really the number one consumer protection so um the reserves are the buffer for risk and uncertainties and unexpected events and um we know that the last year we've had um a really prime example of how an unexpected event can have both positive and negative impacts on reserves and we do have um the obligation to navigate those short term ups and downs it can have a yo-yo like effect on on reserves but we navigate through that and we're committed and confident that our approach to looking at a long-term contribution to reserve is really important so that we protect our members from those shots is there a connection between membership growth and reserves yes um it's important the other thing that we talked about earlier and I think Paul referred to me is that when we look at the RBC outlook for 2022 and understand what that looks like the projection that we included in the the um pre-file testimony did not include any assumption for a market share shift as a result of MVP's rates being submitted much higher than ours so um we have a fair amount of material that's been submitted as part of the docket in the binder that illustrates the impact of that but we we have the outlook as in my pre-file testimony and then we have to think about um how membership impacts RBC RBC is a ratio so it's um driven the numerator is our our member reserves the denominator is the calculation of the risk that we um hold if you will as an insurer and when we add membership we add risk so it means that we also have to add reserves so it's very important that we think about the the forward-looking view of membership growth as part of our solvency outlook and if we were to grow and not have the reserves it would be fortunate that we would not be able to continue to grow in that way um and in uh discussing the potential for market share shift you referenced MVP's rates as filed this year are you able to provide any historical context for the basis for expecting a market share shift this year? Yes as uh included in the pre-file testimony and in Paul's supplemental pre-file testimony um we looked back at history and um the last time our rates were less than five percent different from MVP's rates but we had a market share of 87 percent so if our market share at the moment is just under 50 percent it's not unreasonable to think that we'll be looking at some growth in the next year. Miss Green would you please turn to exhibit 21? Yep um and is exhibit 21 the pre the supplemental pre-filed testimony for Mr. Schultz that you were referencing? Yes it is. And in exhibit 21 uh in the confidential materials does Mr. Schultz provide more detail regarding the potential RBC impacts of a market shift? Yes he does uh we Paul's team Mr. Schultz team um modeled the impact if there was a 10 percent shift in market share from MVP to Blue Cross and also a 20 percent shift and it does show and illustrate um that it has a significant impact on RBC. Thanks um could you uh turn now Miss Green to exhibit 15 on page six? Could you please briefly describe what the table is on page six? The table on page six was um prepared at the request in response to one of the the HCA's questions about how the projection from last July compares to what actually happened in 2020 so we um the projected 730 2020 column is what we knew or the projection that we did based on the information we knew back then and then the RBC actual impact or RBC impact actual 1231 2020 is the actual impact and then it just showed where the the major differences came to be. I want to point you to the two items um in the middle of the page under impact of changes in pension funded status do you see those? Yeah uh there was been there's been some discussion earlier today uh regarding these two items could you please explain um those two items and how they are different? Yes so the uh change in pension funded status due to the Allianz investment losses um that was initially estimated at 180 percentage points based on what we knew when the first when we first learned of the losses um the actual impact of the losses after the complaint was filed in September the NEBC was able to update the estimate of the asset losses based on the work that they had done there so that changed to 163 percentage points or a reduction of 17. The other item the change in the pension funded status due to the impact of year-end actuarial assumptions is an item that we have every year each year the pension is valued as part of the year-end accounting and the actuarial assumptions all of them together collectively will require an adjustment to the pension assets and liabilities and um this year we had to increase the liabilities due to a reduction in discount rates and that was the major driver of the minus 59 percent but that is that is not related to the Allianz investment losses it's a um I call it a normal pension adjustment but it was larger this year than we'd seen in previous years excuse me excuse me mainly because of the lower discount rates used for the liabilities uh and focusing on that line change in pension funded status due to impact of year-end actuarial assumptions would that line be the same or different if the pension losses had not occurred if the Allianz strategy had not failed we still would have had that minus 59 in RBC at the end of 2020 that adjustment um was not caused by the Allianz by the pension funding losses it was not there was uh if I could direct you to the last second to last line still on page six of exhibit 15 the impact of the net deficiency reserve accrual do you see that I do there was some discussion about that figure with commissioner P check um are you able to explain it uh at least at a fairly high level what that um reflects yes in consistent with commissioner P checks testimony it is a year-end reserve that uh under statutory and gap accounting principles we have to review the following year's contracts and see if there's any um situations where the premiums or revenue related to those contracts are insufficient to cover the costs and a good example of a component of that premium deficiency reserve is the 2021 COVID related costs so that I'm sorry I'm sorry excuse me this is the court reporter the 2020 what 2021 oh okay thank you yeah so the 2021 um COVID related costs where um we did not include in our 2021 rates anything for the additional COVID costs that we thought um we would incur because of the return of some of the care that had been deferred um that is a an amount that we will pay in 2021 um but we had to reflect that in 2020 because it was a known loss so um that is the function of the premium deficiency reserve we go through that process every year and um I'd say in half the years in my history here we've booked a premium deficiency reserve um this year it was somewhat larger than historic historically it has been um and the screen if you could turn now to page nine of exhibit 15 yep and they are and what is that document this is the supplemental health care exhibit that was discussed earlier and I believe earlier that mr angolf had some questions regarding page 10 line 11 so if you could take a look at at those figures the underwriting things in the individual and small group are you out there do those figures include the um 10.1 million dollar litigation recovery related to risk orders it does are you able to show um where that appears on this exhibit yes in in preparing the exhibit um you know what there wasn't a specific line item for this type of litigation recovery but it is included online so section one on page nine line 1.1 or I guess 1.10 and it's other adjustments due to mlr calculations that relate to premiums and if you add the um 4.225988 in the individual column in the 5.859.988 in the small group column that is the 10 million just over 10 million dollars with the risk corridor that's included in those results thank you um to continue with some some other questions related to matters that came up earlier um does blue crosses with respect to blue crosses required rvc range of 590 to 745 are you able to explain whether that range incorporates the shared risk arrangement with one care vermont yes back during the analysis and the very the two reviews that were done on that what is the appropriate range for blue cross blue shield of vermont and the range ranges 590 to 745 and the shared risk arrangement one care vermont was was part of that analysis said another way had we not had that shared risk arrangement with one care vermont the the range would have been higher the the the target range or the required range would have been higher there was also some discussion with commissioner p check regarding whether fixed perspective payment arrangements reduce administrative costs are you able to address that issue yes the um the folks that work on the fixed perspective payment processes um um the in the near term it doesn't reduce operating expenses at all because we're really doing both the old way and the new way at the same time and until we find ways to inform our um analysis around trend or um you know the services that the vermonters use the claims payment process will really stay intact really for the foreseeable future and then the fixed perspective payment process is layered on top so it's until you get the entire system on a new approach it won't it won't say it costs um in the grand scheme of things because you still have to do things the old way so you know if hypothetically you could get everything on to a new process that I guess could save costs but that's not where we're at at all are there costs associated for blue cross as the payer with developing fixed perspective payment arrangements yes one of the things that I um called out in my other comments is that all of the payment arrangements whether it's value-based care programs or looking at certain pilot programs those take our clinical resources and our contracting resources and many of our technical resources to figure out how to implement them not to mention the recording that's required to the stakeholders the providers and the state regulators so a lot of these payment processes and new ways of doing things at least in the short run add on to the administrative expense there's also some discussion earlier with commissioner p check regarding whether a broad shift in the healthcare system toward fixed perspective payments would reduce the need for reserves are you able to comment on that yeah my my comment on that is the um we know that as you share risk with providers and move on to some of these other payment methodologies the risk in total doesn't really change it actually just moves from one entity to another because the risk of higher utilization is out there no matter no matter what we do it's just the way healthcare is so and in in addition when you divide up the risk into smaller pockets sometimes it will take more risk because each entity needs a little bit of a buffer so you know I don't know scientifically I haven't done the math on that but my sense is that we need to think about whether or not that would be a net plus or a net minus if we were to and move the risk out of one entity into another miss green could you turn now to exhibit 17 please okay I'm there and what is exhibit 17 exhibit 17 is the solvency letter from commissioner paycheck the commissioner of the department of national regulation it was issued on July 6 and it has an accompanying letter from Oliver Wyman that went along with that also dated July 6 have you reviewed exhibit 17 including the letter from Oliver Wyman I have and could you turn please to page 11 of exhibit 17 yes could you read the last sentence on that page please the projected RBC ratio is at a level that does not appear to provide a rationale for reducing the filed individual or small group rates do you agree with this opinion from Oliver Wyman I do as I included in my pre-filed testimony our RBC outlook is expected to be in the target range at the end of 2022 that outlook does not include anything for membership growth as I mentioned earlier and so if we see a large shift in market share from MVP to our enrollment that RBC will go down you know from that outlook and based on our reserves in our solvency position I see no basis to cut the CTR could you please turn back to page four of exhibit 17 which is also page four of the commissioner's opinion would you please read the first two sentences under impact on solvency of proposed rate DFR does not expect that the proposed rate as files will have a significant impact on our overall solvency assessment of Blue Cross Shield of Vermont any downward adjustments to the filings rate components are not that are not actuarially supported however will reduce Blue Cross Shield of Vermont's surplus and negatively impact its solvency do you agree with the commissioner's opinion as as you just read it I do and I'd say that we strongly oppose any proposal to reduce rates below the recommended L&E rate and or any proposal to reduce our CTR the both independent actuaries I should say the the Oliver Wyman analysis as well as the L&E analysis both of these independent actuaries did their own analysis and research on our level of solvency at RBC and all of the measures that you looked at indicated that our RBC and our our reserves were low in fact we ranked near the bottom of comparable insurers does Oliver Wyman compare Blue Cross's RBC position to other comparable insurers yes they do on page nine of the exhibit I guess it's page five of their letter they say that they include a series of other insurance companies and then they say in the paragraph underneath it says Blue Cross Blue Shield of Vermont's RBC ratio has been the lowest of all the comparative companies since 2018 and you can see from the chart that there's also many of these insurers have RBC level standard well above the high end of our required range has Lewis and Ellis provided information comparing Blue Cross's solvency position to that of other insurers yes they they provided quite a bit of analysis on that and I would like to point out is that they looked at our level of reserves from four different directions and four different metrics and what's important to note is that every single one of those metrics indicated that our reserves are low compared to other insurers that's an exhibit 16 and are you referring to pages 19 to 20 of exhibit 16 yes it was just so page 19 and 20 it starts on page 19 and moves to page 20 and as I said they they look at it four different ways the first way they look at it is RBC at the bottom of page 19 and they on the comparative 65 insurers blue blue plans that they compared to we ranked 57th out of 65 and then on the second metric that they assessed it was on a per member per month basis and that's at the top of page 20 and on that metric we ranked 53 out of 63 whose plans for the data that was available the third way they looked at it was how much surplus do you hold as a percent of your annual premium and we held 21.6 percent of annual premium as reserves and it was significantly lower than the medium of 39.9 percent and then the fourth and last way that they looked at it was on how many months of reserves do you hold as measured by how many months of claims could you pay and we held 3.2 months of claims in reserve and that ranked 51 out of 51st sorry out of 65 blue plans and it was significantly lower than the medium of 5.4 months so I it's important to recognize that a lot of these insurers even there even if we were to move to the upper half of our range or even to the top end of our range we would still be relatively low compared to the risk protection that these other insurers have provided their consumers. Ms. Green are you prepared to provide additional testimony and answer questions regarding Blue Cross's RBC projections for 2021 and 2022? Yes I am. Is it appropriate to provide that testimony in public session? It is not. Why not? The projections our financial projections we believe are confidential and they contain commercially sensitive information that gives Blue Cross business advantage. We take great care to maintain the confidentiality of our projections and therefore would have to be handled in an executive session. Do financial projections also sometimes include items that relate to confidential contract negotiations? Yes they do. With respect to contracts are you prepared to answer questions regarding Blue Cross's negotiation of provider contracts? I am. Is that appropriate to do in public session? No the contract details are considered business confidential and would be detrimental if disclosed in a public setting. And if you look at page 22 of exhibit 19 which is your pre-file testimony did you further explain that concern there? Yes I did. Hearing officer Barbara that's the close of our public session direct so I don't know how we we're going to proceed directly into executive session or if there is some public session questioning by others first. Yeah so I guess my question for you Bridget is once we do go into executive session, assuming we do, you would have more testimony to elicit from the screen on direct. Is that what I'm understanding? It's very very brief it would just be a few of you brief questions about the RBC outlook going forward and then Ms. Green is prepared to answer questions from others if it relates to the confidential material. Okay so I would like to proceed with questions from Mr. Angoff and then from board members on non-confidential stuff before we like to move into an executive session. So if you're done with your direct on the non-confidential stuff I'll turn it over to Mr. Angoff for questioning. Thank you. Thank you Mr. Hearing officer. Ms. Green would you agree with me that line 11 of page 10 of the supplemental health care exhibit which is exhibit 15 shows Blue Cross with a net underwriting sorry with an underwriting gain in the individual and small group market of approximately 25 million? Yes that's what shows up in that line yes. Okay could you turn please on exhibit one to page six? Okay and you see then the number 15 912 915,962,962 right you see that on the bottom right? Yeah. Okay can you explain the difference between that number and the 25 million on the state health care exhibit? Yes as we established earlier it's the difference is the risk corridor settlement litigation proceeds so that was about 10.1 so if we add the 15 million and the 10.1 that's approximately what's in the supplemental health care exhibit I think we also discussed this morning that the purpose of this exhibit was to compare how the pricing turned out relative to actual results and early on in the three hours the risk corridor payments were deemed to not have funding so that they were not incorporated into our pricing assumptions it was only much later after many lawsuits at the federal level etc that the risk corridor payments emerged as something that could be recovered and so I think Paul said it well earlier sorry Mr. Schultz said it well earlier today that depending on what you're using this schedule for it's important to know what's included and what wasn't so that's why the risk corridors were left off. Did you also hear Mr. Schultz and Ms. Green talk about another 3.7 million that was not included in the 15.9 million on the chart on page six? Yes and as he explained the the filing went in in early May and the final risk adjustment true up was not known until after that time so that is an adjustment that could be layered on to this table. Okay so then it is fair to say that that 3.7 million then is in addition to the additional 10 million that's included in the supplemental healthcare exhibit but is not included in this chart on page six of exhibit one. Right because it's a 2021 event so it'll show up in 2021's supplemental healthcare exhibit. Okay could you turn now please to exhibit 19 your pre-file testimony. Okay I'm at the exhibit. Okay and on page six the first full paragraph beginning with even on line five you see that. I'm on page six sorry which line? Yes page six starting on line five even beyond the pandemic you see that the first full paragraph. Oh I'm sorry it's on the uh yeah even beyond the pandemic yeah okay so there you list several different examples of events causing unusual volatility at RBC and I just want to make sure that I understand them and that the board understands them. What is the subscriber lawsuit settlement by the National Blue Process Association? That is the uh there was a class action suit and um there the National Blues Organization is in the process of settling with the subscriber plaintiffs and the Blue Cross Blue Shield of Vermont share of that is something that we have to accrue in our financial statements and for a long time that was something that we didn't know if it would cost something or not cost something so that was an example of something that it's hard to plan for. And what is the lawsuit about? Pardon? What is the lawsuit about? What is? Yeah I'm probably not the best one to go into details but there's two components to the lawsuit. One component is subscribers um the class action subscribers nationwide have um accused the Blue Cross Blue Shield Association of um sort of tying up the markets uh to limit competition and then the other part of the lawsuit is a class action group of providers um accusing the Blue Cross Blue Shield Association of companies for um using their their power to reduce the provider payments so it's an interesting lawsuit in the sense that in some some ways both things can't be true so in any way that's at a very high level but that lawsuit was about. That's helpful and what does Blue Cross's share of the liability? Blue Cross and Vermont share the liability in that suit? The settlement liability our share of the settlement liability is $8.2 million. Okay then the second example you list there is a substantial deficiency reserve driven by extreme competition in the self-funded market requiring multi-year rate guarantees to retain our largest customers. Could you explain uh could you explain how that competition came today? And if I can just interject to to note that some of that may be more appropriate for executive session but I think Ms. Green will tread that line. Yeah so I included this one because the um one of the things we had so many different disruptions I'll call it coming at us in 2020 that on top of market losses and the pandemic itself and everything else going on some of the large national competitors really came to our our large clients and drove down the the price you know offered a much much lower price and Blue Cross Blue Shield of Vermont was very much forced into difficult decision as to whether or not we reduce rates to keep that business because as Paul indicated sorry Mr. Schultz indicated earlier today that by having those large clients on our books it significantly contributes to the fixed costs that we have as an entity. Our scale is very small relative to these large national competitors and so we're sort of forced into choosing to keep these clients but at at a loss and so yeah um could you explain why individual and small group customers should pay for Blue Cross's meeting the competition in the large group business? Our small group and individual business is not paying for the losses in our self-funded business. As Commissioner Pijek and Mr. Schultz testified earlier we have a number of segments of business that we deliver to Vermonters and each one of those stands on its own and we navigate as best we can to make sure that it all comes together in the you know enterprise view of RBC. Oh doesn't the contribution to reserves though that you're asking Blue Cross small group and individual customers to pay help fund that competition in the individual in the large group market? Not directly that's why we have a commitment and um long-standing view that we need a certain amount of contribution to reserves that relates to the growth of the small group and individual medical costs and it's the minimum required it's the very minimum required to keep pace with the growth in health care costs so we're not charging anything for losses elsewhere in the business per se. Well are you saying then that the fund that the CTR factor in this rate filing is segregated from the money that goes to fund the uh the multi-year guarantees that you're offering to your largest customers? Yes each each insured book that we submit filings for has a standalone contribution to reserve requirement that that its purpose is to sustain that book of business. But you've got indivisible surplus right the one for the CTR factor you're asking for it funds indivisible surplus correct? It funds what sorry I just didn't hear that. Indivisible surplus you don't have separate surplus accounts for your large group business and your small group business and your individual business correct? True yeah I mean the surplus is fungible it somebody mentioned earlier that it also includes the investment gains so you know we don't allocate that more to one business versus another. Your third example there is very low discount rates driving higher defined benefit pension liabilities could you explain why that is why low discount rates drive higher defined benefit pension liabilities? Sure that's the 59 percentage points I mentioned earlier so at the end of every year we have our pension actuaries figure out what based on the benefit design of the plan what our future pension liabilities are and one of the key assumptions there is what what are the interest rates that you'll need to pay in order to make good on those liabilities and so the market rates if you think about fixed income rates have been very very low and they decrease significantly during 2020 so that required us to increase the liability because at the lower rates the liability is higher. And then conversely if interest rates increase then you'd be able to decrease that liability correct? That's correct and it does happen I looked back at the history and I'd say this year's decrease in rates was significantly larger than what we experienced previously but each year you know I'd say we've had as many years at least since I've been at Blue Crossville Shield in Vermont we've had as many years with an add to surplus because higher interest rates as we've had a decrease to surplus because of lower interest rates. Have you ever had a liability this great based on the discount rate driving defined benefit pension liabilities? In my tenure which is only the last eight years this is the largest one we've seen. And how much bigger is it than the next largest? This year's is 12 million and in 2018 we had an increase in liability of 5.4 and then a decrease of 3.6 so then it went back up 12.7 so the lowest impact we've ever had is a little less than $2 million so did you say then that the second highest is 5.4? Is that what you said? In recent history since 2014. Could you turn please to page eight and in the last paragraph you see the second line you refer to your decision to change how we allocate overhead among lines of business do you see that? Could you just remind me I've been looking at the exhibit pages could you just say the page number again sorry? That's okay yeah this is page eight of exhibit 19. Yep I would you yeah I see it now we're allocating overhead yeah. Okay and could you explain first what that decision was? Your decision how we allocate overhead among lines of business what did you decide? Yeah so when you get to fixed costs and overhead it's there's no what's the word there's no specific way to allocate costs and we've looked at this a couple of different ways over the years especially as our business changes and our membership mix shifts we have seen it where a lot of our you can allocate overhead based on where the direct costs are in your business or you could allocate your overhead where your capital is or you could allocate your overhead just straight up based on where your your membership sits so what we did in the interest of recognizing the competitive pressures in the marketplace we wanted to come up with something that was we believe more appropriate and so that's what's described here your allocating overhead as a consistent set of premium or premium equivalent going forward which we think is appropriate. Okay then is it fair to say that there's no prescribed way to allocate costs? When it comes to the indirect fixed costs that's what I'm saying when we have direct variable costs which I think is included in the docket somewhere we shared the expense study that we did and when it comes to direct costs we allocate them directly to where they should be it's written my comments are really when it comes to the the most indirect overhead allocations. So your decision to change how Blue Cross allocates overhead among lines of business that that's something that you had discretion to determine. Yes. Could you turn now to uh well there's a discussion we don't don't really feel free to but you don't really need to refer to uh your testimony my question is this you've uh you've said that if Blue Cross uh gains business it will uh that that will drive down its RBC ratio correct. Right. Okay but Blue Cross has lost business for the last five years correct. Correct. And from 20 to 21 it even lost a little more business than it lost between 2019 and 2020 correct. True we we lost a lot of business between 18 and 19 I was getting confused with your your uh the years but uh yeah we have lost in the ACA market in the small group and individual market we have been losing business okay so so why do you think after five years of losing business it's a reasonable assumption to assume that Blue Cross will now begin gaining business. My earlier comments I said that uh when we have um statistics and research that tell us that when our price differential with MVP is less than five percent our market share is much higher and that's very consistent with uh economic models when you have wider price differentials or more narrow price differentials that will cause customers to to move and so we've looked at the declines in membership as it relates to the relative price differential between our rates and MVP's rates each year and we can see a direct correlation between the market share shifting and the rate differential so it's very much a reasonable assumption that there will be some shifting from MVP to us going forward. But but your your statement just then though is based on the assumption isn't it that the rates as filed by both carriers or as it's filed and adjusted a little bit by LNE would be approved by the board correct? True yeah I can definitely agree to that qualification. If the board found for example that MVP's rate was much too high and found that yours was just a little too high would your uh would your conclusion that it's reasonable to assume that Blue Cross would have a gain in enrollment change? Well I was raising my comments off of the the work of the actuaries and with LNE's um rewarding on both MVP and Blue Cross I was making an assumption that the actuarial supported rates for each company would remain in some fashion sort of less different than they have been in the past once those rates are in place. If you know I take your point if that's not how it works then something else will happen. And it's also possible isn't it that people who uh who switch to MVP like MVP and are going to stay with them because they like MVP correct? It's always possible we have a lot of evidence that when the rate differential is five percent or even when it was wider than five percent we have a lot of people who still stayed with Blue Cross and really appreciate the service and the quality and the network that we offer so we do know that people change plans for a whole host of reasons. Could you turn to page 11 please of your prefile this morning? Yeah I'm there. At the very bottom under the boldface type you say that we expect that this business will yield less than a 1.5 percent return in 2022 do you see that? Yes. Okay that's when you say a 1.5 return do you mean a 1.5 percent return? Do you mean a 1.5 percent return on premium? Yes. And you're saying that with knowledge that in 2020 the business returned in the same business that combined individual small group of business had a rate of return on premium 8 percent correct? Because of other extenuating circumstances a pandemic and a risk corridor settlement that was not planned on this this statement here we expect that this business will yield is is about 2022 and based on our pricing assumptions for 2022 so coming full circle back to Paul Mr. Schultz's testimony earlier that when we are estimating for the coming year that's 18 months out we really are very good at making those estimates. The comment here is just to acknowledge that with the other COVID costs that we expect in 2022 that we're not including premiums and the short-term nature of the change in allocated costs that the actual segment the business financial segment results in 2022 won't be 1.5 percent it'll be broadly break even. Could you turn to page 15 please? Okay and there in the middle of oh wait that that is um does the box around it mean that it's uh should it's confidential right? Yes it does yeah okay then then I will address that and it's my last question on your on your pre-fail Ms. Green I'll wait for uh the confidential session then to uh ask that thank you Ms. Green. Sure okay four questions starting with member Yusuf. Great thank you hi Ruth um few questions before we go into the executive um can you tell us um for in this maybe a follow-up question for the past five years what the subsidy has been for that large the large group plan where we're talking about that they're losing money because of competitive reasons that I'm sorry could you just repeat the question um we're losing money on some of the plans because of competitive reasons where you're subsidizing the plan could you tell us what the losses have been on that for the past five years? Sure so I can um I can provide the board in the um five-year history and the stat blank um you can see the some total of all the segments but you're interested in um the segment that we were just talking about in terms of the premium deficiency reserve is that the one? Yes yeah okay yeah that would that would be a follow-up we we have not had uh until this year we have not have had um significant losses in that line but I can get you the data. Okay great um and when you talked about the impact of RBC with membership growth um and the potential impact that could have on RBC if the membership grows have you offset that with the fixed portion of admin costs partially offset it? Um the the are you referring to the membership growth that we've been talking about if there's a shift in share error between MBP and Blue Cross? Yeah that is not accounted for in our RBC outlook at all the allocated cost portion is accounted for in our RBC um yeah I was looking at 2020 there were two graphs that talked about what the impact could be if there was a shift yeah and we're doing that it should be offset by the fixed portion somewhat offset it's not going to fully offset it but the fixed portion of admin costs because if you do have membership growth only the variable piece will go up so that fixed part should offset that so I just want to make sure we're looking at the numbers that that's included. Thank you sorry I was not understanding your question but absolutely that's why earlier when I said we made this decision to allocate cost differently in the short run that will have an impact on surplus but if we do grow and have more membership that will be you know coming back around and filling that gap so you're right. And when you talk about that allocation change I guess which drove that for the admin allocation change and where I'm going is have we historically over allocated these lines of business with admin costs? Yeah the catalyst for this had to do with the pressure on our overall enterprise costs as we're serving all the different segments of business in Vermont we're finding it very difficult to invest in new technologies and capabilities that you know keep us relevant to our customer base so we had some increases in our admin costs in 2020 to invest in some of those new capabilities and then we had the intense competition that came along and said okay not only are you going to not be able to have a fee increase we're going to expect you to lower your fees because of the competition so it was it was kind of the at an enterprise level we had all of these things kind of converging together and then we were looking at the you know at some point the the competitive view of what's included in each of the insured rates for operating expenses can't go too far out of line with with the market expectation so it was really us looking at a way to just head something off at the pass and not go there we also look at our administrative costs by segment and benchmark them against a benchmark called Sherlock which is an organization that does a study of blue plans and we're for the small group an individual book of business we're very much comparing well to those benchmarks and so we felt like we couldn't increase cost for these other fixed costs beyond those benchmarks so that was one of the reasons that we decided that we needed to take a hard look at how we were doing this okay um going to exhibit 15 page 6 and then I'm going to be looking at so kind of to toggle between to exhibit 23 page 45 and what I'm focusing on is I want to put some dollars behind the change in the pension fund status both the 163 and the 59 percent um so when we look at where your pension it looks like on page 45 exhibit 23 that the fair value of the pension at the beginning of the of the year was 69 439 is that correct that was the fair value of the plan assets yeah top of the page and then I mean is that where we would look at then the change the 163 percent decline which is about I think about 35 million is that what's captured somewhat in that actual return on plan assets yeah if I may I can point to do a couple of other lines on the same page so if you look at the reconciliation of funded status in section three you look at the change in the overfunded plan assets and the change in the total liabilities recognized um for both the post retirement benefits and the pension benefits um that will add up to a total loss of 47.8 million and that's also shown on page three of the like the sorry not page three it's also shown on the change in surplus page in the front part of the book so page six of exhibit 23 there's something called the change in pension and post retirement benefit obligations 47 and 822 thousand so that's like some total of the two components and what we've done is just broken out the amount that's due to the alliance losses which is about 35 million and the rest of it is the valuation of 12 million so hopefully that helps the case where I'm having some trouble is reconciling if I if I took where you started from and and just took out the um the 35 million right how much would have been left in assets okay so go back up to the top where you were yeah the reconciliation of plan assets so you can see the actual return on plan assets is a minus 36 yeah so the vast majority of that is the failed alliance okay and then of course we put cash back into the fund and the total assets at the end of the period was 42 million does that help a little bit so the 15 million cash you put back into the fund right that is fairly extraordinary right because because of the position of the fund I mean I guess we were talking about is that what's partly in the change in pundit pension funded status do the impact of year end actuarial so the the 15 there's a lot of questions in that statement so the 15 million is unusual we normally make about a two million dollar contribution and as soon as that money gets into the pension fund it starts earning money so it becomes part of the plan asset base and and earns return the the additional 13 million was because of the alliance failed strategy we had to sustain the pension to a minimum level to achieve the the irisa funded requirements and were to pay out to keep the the the plan whole so that that's all part of landing on the plan assets at the end of the year and that combined with the liabilities is what all together adds up to the 47 million dollars but the the the actuarial valuation assumptions go beyond just the assets they take into account the liability so on the page before that page 44 there's a a number of assumptions that that show how the liability the benefit obligation at the beginning of the year changes so that's the other piece of the pension valuation it's the assets plus the changes in the lot abilities and I guess what I'm going at is I and maybe I'm misinterpreting what um you know at the beginning when you were being questioned by your lawyer the 163 is clearly what we're going after you know alliance four for the losses on that was on page 15 exhibit six and then the additional 59 percent I mean it seems to me one wouldn't have happened without the other am I wrong in that I mean or of this 15 million you wouldn't have put 15 million additionally into this plan if you hadn't lost 35 plus million because of of what happened you know that you're suing them for so to me to me they I just want to make sure we're representing that correctly because I I think they both do tie to what happened with your your fund administrator so so the other the other part of the asset returns contribute to the pension valuation as well so we because we have a pension valuation every year and every year it's affected by both asset returns and discount rates and other you know retiree rates and so on number of employees and all of that we we nearly looked at the total change and then isolated the alliance loss so the everything else is as it would have been if we had not had that loss so I guess I could I can see where you're getting at that there might be a small portion of the 59 percent that relates to whether the 13 million relates to the timing how long it took us to get it into the pension fund and would we have earned something in the meantime we I could take it down one more level but the vast majority of the 59 percent has to do with the liability change not the asset change at this point okay I mean I just want to walk through one more time not to beat the dead oyster but it seems like you had a fair value of assets of about 70 million you went down about 36 million most of that was related to the issue you had with your pension fund administrator because you're so low now and because you have fund obligations you have to put more money into the account right so that that's the 15 million which is about 13 million higher than you normally would have put in here and that ultimately right comes out of the money left in surplus or out of the RBC is that correct yes and as does the changes on the liability side which is in section one so there was an eight million dollar change the less than eight million dollar change on the liabilities that's also part of that 59 percent okay and just another just on that same schedule on the financial statements in 2019 there was an actual return on assets of 15.1 million yep as we're seeing the 36 million hit the RBC negatively did that help the RBC in the prior year yes and so it went through in the last five years we've had oscillating impacts one year it will be a decline between this and the liabilities and then the next year it might be an add to surplus I think the cumulative on from 2014 through to 2019 was a net negative of about six million dollars so it it does go up and down each year okay and then last year you did testify that the impacts of the pension plan would not impact rate payers with an increase of rates and yet we did hear Paul talk about you know any shortfall and RBC depleted must be replenished for future years by rate payers so you know if this hadn't happened and we know it did happen you would have been well at the upper end range of your requirements for RBC and your forecast for where we might end up in the future would be well even higher than that so you know at some point we would have returned that to rate payers correct I think in looking at a hypothetical situation is difficult for me because if we say what if that hadn't happened it probably the scenario about the pension loss not happening would have had to have included that the pandemic didn't happen so then we wouldn't have had the other incomeings and you know RBC is affected by a lot of one-time items both positive and negative so it's difficult for me to set aside one-time negative items and not think about the one-time positive items that's why we stick to a long-term approach to our CTR so that each of our premium submissions has a consistent level of contribution to reserves and then as we weather all of the risks and unforeseen circumstances we we have to navigate that as an enterprise through what our total solvency reserve level is so it's in other exhibits and when we go into executive session I can illustrate how as we sit here today we take a look forward to 2021 and 2022 and assess you know what does that mean in terms of our solvency position so it's that long-term one-and-a-half percent CTR is really what I believe is you know helping us continue to contribute to reserves but protects our members from shocks from these unexpected items that come and go okay and then just one more thing on the the impact of the the deficiency reserve which is the 138 percent which would be what close to 26 million or something like that that's better I think it's 2028 yeah doing a crop quick quick when we've talked about COVID and because we're saying that's somewhat related to COVID but when we've talked about the gains we're getting from COVID and then and then you know in 2020 and that was in the underwriting I mean we more than offset that with this 138 percent isn't that correct and yeah so if this is what you're getting at the geography of the COVID costs not being in rates is if we didn't have a premium deficiency reserve requirement that would come into RBC during 2021 when those vaccinations and tests and treatments and the rescheduled care from 2020 happen but because we didn't include those in rates in 2021 the geography is such that they're already included if you will in the 480 at the end of 2020 isn't that a little like accounting principles tells me that doesn't really line up if it's for you know 2021 costs that we didn't put in the premiums for 2021 I'm just are we jumping the gun putting that in this year's RBC because it's for things that should occur in 2021 it's the statutory and gap accounting principles that for insurance companies if you have contracts in place so we had 2021 enrollment that we knew the costs were going to be higher than what we had for premiums so the requirements for our industry is to book those losses because the especially on a statutory basis they want to make sure they understand what your solvency position is and so there is a tendency to have rules that either don't count assets that other companies can count or to bring losses into the current period that other companies would wait until they're encouraged and since we're mid-year in 2021 are we seeing that that that's occurring at that rate we are seeing the COVID return of deferred care and the vaccination costs and the various that that was what was modeled in Mr. Schultz's COVID modeling and we are seeing things come through as expected okay okay I'm done with my questions thanks sure okay then we'll move to board member lunch do you have questions I have a couple and I'll have more if we move into executive session hi Ruth I hope you're doing okay today thanks in exhibit 13 I talked with Paul a little bit about this but in exhibit 13 in the land framework which is on page four there's a very small percentage in fee for service foundational payments do you know what that consists of yeah when that question came up earlier we have Kate Mack and Dr. Kate looking into the answer to that question okay thank you and could you tell me a little bit about how the SVMC fixed payment program is going and any hurdles you've seen you know if it's going well yeah just an update yeah I don't have a lot of details on that but I it's going well maybe by virtue of not hearing a ton of issues about it I think it's going well and it was great to have them get out of the gate as is the first facility to join in okay and I was curious if you had Blue Cross has a strategic plan for payment reform and health care reform the strategic plan we have it's a key component of our ongoing business strategy to support health care and payment reform in the docket in the responses in the binder we walked through a number of the things that we're doing and gave some feedback based on questions the the board asked I can go there and talk through some of those if you like or your specific question is is it a strategic plan I'd say it doesn't stand alone but it's definitely incorporated incorporated in our overall business strategic plan okay I was just curious if you had targets for moving forward with payment reform and and how that looks in your strategic plan I think in recent years our focus has really been on the one care shared savings programs and trying to get the more of the commercial book into that and and working on the self-funded so it's been very focused there I think we have you know specific measurements that we use to measure whether a program is working or not so that's that's a measurement I'd say we don't we don't have an overarching target in terms of total but we do have a lot of initiatives underway with with goals and a big part of that is partnering with state stakeholders as well as the providers to sort of go where we think the value is and sometimes that's not always you know it's certainly not at our sole discretion on where that is so I do think that the setting of overall targets is a little bit difficult in that regard okay thank you and thank you for answering my question around the enrollment and updating that that was helpful in terms and this may be something that gets into contracting strategy so if this should be deferred please just let me know but I'm wondering what your strategy is in response to the audio only DFR order and sort of the direction that it provides around audio only payment rates you know I think as ha as mr. Schultz testified earlier of course we're going to implement the rule as it's prescribed with the jury's still out in terms of how it will impact things but I think we will be working around the fringes of that but certainly having a rule out there just like having a hospital budget increase approved the provider community will say okay well this is the rule this is this is what we would get but our contracting folks will of course be be working on that as they worked across all of our contracts sure the the dfr order provides for a minimum of 75 percent my understanding is that currently it's at a hundred percent so that's why I was asking about a change because it could actually be a decrease from where you are today yeah I think our goal would be to have it be a decrease but the goal and the you know there's always the interplay between these assumptions and other aspects of our contracts so each negotiation will take on its own pace in terms of how quickly we can get to that minimum okay thank you the rest of my questions are related to information in the exhibits that is marked confidential so I will hold those thanks all right word member Pellum Ruth if I could reach through the screen and give you a glass of water I would happily do it you know there you there you go there you go um this is um this is I mean my my question is I'm trying to walk away in part from this hearing process in the sense of where Blue Cross Blue Shield is on healthcare reform and so earlier in the day I think it was been when Paul was presenting you know I took from your filings you know we uh the statement um that Blue Cross Blue Shield is currently working to expand fixed prospects of payments with willing partners but then when we start to talk about willing partners we find that they're few and far between and tough to come by and then later on based on an analysis of 2019 results with one care the filing says this filing does not include any adjustment to projected expenditures relating to one care program and then further along looking at the experience index rate that capitation is less than two percent in both the individual and small group filing so it's a very small piece of the pie and then your statement just a a while ago was about fixed perspective payment was that they don't reduce operating expenses until the entire system must be on a new process and so I guess that kind of takes me back to Robin's question about a strategic plan and and healthcare reform um you know I know I mean you can say it's hearsay but I know that the administration has told the world that they are totally behind the all-payer model etc and so there's a lot of people pushing in this direction um Medicaid is is pretty much a hundred percent all in we're trying to get Medicare uh to um uh be be more in and they may maybe willing we'll see but I I I don't get um a sense from Blue Cross Blue Shield that that this is um at a level of importance as it is to so many other people across state government stakeholders yet Blue Cross Blue Shield and MVP are the are the providers and it actually ends up getting cost shifted onto when the existing system doesn't work that well so um I you know so should I I walk away from this with that kind of negative view I want to walk away with an optimistic view that we're all in the boat rowing in the same direction but I I can't get there given what I'm hearing and reading yeah um that's unfortunate I I do believe that our teams are working every day to find um new and better ways to provide value-added care um perhaps Dr. Kate can elaborate a little bit on what some of those are on the ground um I would draw our attention to our response to the board's question number four in exhibit 13 um sounds like you read it and weren't weren't um impressed by it but the lack of results is is not they're not trying um at the bottom of page four there we have worked to engage providers and we've been met with a lot of caution you know this requires change on the part of the providers um well most of most most of that response is uh confidential um and maybe we can talk a little bit about that um in the discussion but I as I said this morning it to Paul if there's something we can do I I understand it takes a payer and a provider to kind of join together and those unions are few and far between so if there's something we can do because we do have a relationship with you folks and we do have a relationship with key providers across the state that if there's something where we can you know break a log jam um I'd like to hear about it but um you know I I read I read you know what you just wrote you refer to maybe we can talk about a little bit more in executive session yeah I think that the public portion of that response was intended to kind of give up a broad overview of how hard it is to get change in this environment um you know the providers are in concept very aligned with us in terms of what we've described at the top of page five as the triple aim but when it comes right down to it you know they are taking on risk and um you know that is something that is new in some cases to them and also um you know some of the programs just aren't as um successful as others so there is an element of trial and error so um you know I do think it is something that the overarching motion is probably slower than everybody wants but it's not because we don't have um providers and across pursuit of Vermont and other stakeholders working on this regularly and with knowledge and and understanding of the Vermont healthcare system we'll keep talking sure board member Holmes hi how you doing Ruth hi Jessica um well actually I'm going to build a little bit on Tom's questions a lot of my some of my other questions have you've already answered through Maureen's questions and Robin's questions so um but I actually want to I'm interested in your response I think to Commissioner P check's testimony this morning regarding this fixed perspective payment um and so I think I want to understand your views I may have misunderstood your remarks uh I just want to check so you referenced risk under fixed perspective payment in the reference to both Blue Cross Blue Shield risk and total risk to the system um I just want to if the majority of contracts held by Blue Cross Blue Shield are fixed perspective payment which by definition shifts risk from the payer to the provider what would happen to Blue Cross Blue Shield risk level yeah much like the the one care Vermont comment that I made earlier um the Blue Cross Blue Shield of Vermont risk level um in theory would go down especially if there was uh enough mass there okay the risk is being shifted my point was the risk is being shifted to the providers and so they will then need some mechanism for managing that risk and making sure that it's appropriate given utilization trends etc so that that was my point is that in total it won't go down okay but I was my my questions of Commissioner P check were with respect to the risk and the reserve holdings of the carriers and so if the risk is shifted the need for reserves should be lower by the carriers yes in theory yes okay um and if if fixed payment achieves its goal of actually changing the delivery system and lowering health care costs that should actually lower the number of claims that are made lower the value of the claims that are made lower the need for reserves and potentially lower the risk to the entire system if the delivery reform works as it's expected yes or no yes if I guess I'm reading into your comment that you're assuming that the fixed perspective payment causes the health care reform and if it does and reduces costs then yes of course the risk would go down okay um and if Blue Cross Blue Shield enters significantly more fixed price contracts say the majority of their contracts are closer to the majority of their contracts would Blue Cross Blue Shield still invest in the same level of utilization review care management pre-authorizations all of those administrative level expenses that relate to utilization and trying to you know ensure that it's appropriate utilization would that level of assessment change or go down that's where I said earlier that if hypothetically the entire system was in this new world yes a lot of those processes would change but um until if it's only partial then we still have to do the same processes that we do today and and there's costs to getting from here to there so figuring out what the appropriate monitoring and you know measuring results figuring out that in the new world it doesn't come without costs yeah and I understand that I don't disagree but it's really important given the potential that fixed perspective payment has for improving health outcomes reducing costs reducing premiums reducing the need for reserves all of these things it really would be helpful and I understand some of this may come an executive session but I really need to understand what are the obstacles with your providers you mentioned in the you know in the filing some of the resistance related to concerns about re-engineering you know workflows challenges with EMRs unwillingness to be paid less um one I really want to understand those obstacles a little bit more because frankly we sometimes hear that the payers are not ready for fixed perspective payment not that the providers are not ready so I I feel as though I'm hearing different stories from different stakeholders in the system um and I need to understand really where the obstacles are and then what you think can be done about it by the various stakeholders that includes the Green Mountain Care Board but it might include the legislature it might include DFR it might include the providers you know it might include the carriers I really it seems so important to understand this and we've you know we've had these conversations for a couple of years I think ongoing and I still cannot grab my hands around exactly what are the the biggest obstacles and who can overcome them so a couple of reflections on your your question so one of the biggest obstacles is being paid less but I'll be frank so um Lucross was ready to go with fixed perspective payments in April of 2020 and we could have all of the hospitals facilities sign up and do it um prior to that we did have a technical barrier to that but we removed that technical barrier in early 2020 pandemic kind of changed the the shape of the landscape shortly thereafter so I do think we're ready to go with this if we can get the the facilities to sign up the the response in our our docket for your you know response to your questions we indicated that we're we're trying to figure this out as well and we're participating in the group that ahs is convening to try and understand how to find these barriers either hidden or not hidden barriers to move forward but we've been ready to go we did add I think we said in our response to we made significant progress in 2021 where we've added 11 professional practices to the fixed perspective payments so maybe doesn't sound like a big number but going from zero to 11 is is a big deal just to get the thing going is there anything in our Green Mountain Care Board rate decision that we could include this year that would help overcome many obstacles when when someone asks that question on Mr. Schultz earlier today I started to think about sort of things that we could ask the board to to contribute on but I do think it is figuring out what is it that you know the providers in the last year have had so much on their plate you know it's not it's not a mystery as to why no one was moving in the last 15 months but maybe going forward we should work together to figure out what some of those hidden areas are well if you follow up with any ideas around what could be included this year that could have been sent that and let me just ask one more question around this you said the biggest obstacle is being paid less why not start the capitation or fixed perspective payment with paying them the same and then you know assuming that there might be some delivery system reform under that and opportunities for shared savings beneath that that would be enticing to providers to stay in the game that is exactly the premise but I think the the reluctance and this is just for I'm not a hospital finance person but I do know that there's a whole industry of finance people who work on the so-called revenue cycle for hospitals and so the idea that you're going to put a cap on something that maybe previously had been thought of as a place where they could go if they needed to do more of this or less of that to create some revenue I think I think that's the my reference to being paid less is more in that subtlety rather than just the idea that you start out with what they currently get paid because how do you decide what is a normal utilization there's a little bit more debate about that I think when it comes right down to it um do you think that the underpayment by Medicaid is impacting the reluctance to take on fixed perspective payment on the commercial that it's considered commercial rates are considered the safety valve to offset the lack of growth in Medicaid reimbursements and so until we sort of start to solve the cost shift there will be reluctance on the provider side to engage in these fixed price contracts on the commercial side yeah I personally don't have any experience for that but that's that's a reasonable hypothesis it's an opportunity for us to sort of start there and see if we can sort of think about that more holistically in terms of creating the motivation and I guess I would ask on that line given the increases in commercial rates potentially with relationship to the cost shift does your I know you have a lobbyist does your lobbyist speak to the legislature about the cost shift and the impact of Medicaid growth or lack thereof on the commercial payers and on the insured population and and what recent actions has your lobbyist taken in that regard yeah again when we talk about recent actions anything recently has been very focused on our response to the pandemic etc but I do know that in the not too distant history or distant past we have talked a lot about the impact of the cost shift and also I think at one point this might be going back a little bit far and be recent is you know we've done some some off ends on the topic but it is you know we need to take a look at the whole system and even in our responses in this docket to some of the health care advocates questions about what we expect from one care of a month there's there's very much a need to not have the balancing factor always be commercial rates and so we really want to make sure that all of the payment for reform activity acknowledges that we're trying to reduce the total cost of health care not just shift keep shifting it around so yeah I do have any have you ever tried to do it a lot on the cost shift have you so have you ever tried to quantify the proportion of the rate increase for example this year that could be tied to the cost shift we haven't done it this year I'm going back Paul Mr. Schultz might be able to tell me how many years back but we did do some calculations a few years back to see you know how much of the commercial rates is attributable to the cost shift that's a that's a not a small set of analysis and something that we don't do on a regular basis okay I'm going to shift gears a little bit but it is related to these commercial rates do you have access to either a national or regional blue cross blue shield association data that would have helped us assess or help you assess the provider reimbursement levels in Vermont relative to national regional benchmarks you know could you put Vermont hospital or provider reimbursements on a percentile scale relative to the region or relative to the nation in any way is there a way to use your larger network of blue cross blue shield associations to do that I personally don't know but I can follow up on that question for you that would be great um and my last question also ties to this you know in exhibit 13 most of which has been redacted and I know we're going to go into executive session to discuss it but it does give us a glimpse of sort of the relative pricing within Vermont and blue cross shield offered several caveats including you know we should take into consideration differences in severity and scope of services across hospitals and it didn't include professional fees and all of that I recognize that I just as you know the board is in a position each year of having to approve you know commercial rates of hospitals which definitely feed into premium increases for consumers we don't often have basic information on costs where they start right the hospitals ask us to rate increases but we don't have as much information on the starting on the base rates your um what you've submitted to us confidentially offers us a glimpse at some of that relative you know pricing that base so I want to ask you if you would indulge me for a second and switch seats you can be in the enviable position and I put that in quotes for the quarter of being a green man care board member um and your job is to ensure that reimbursements are adequately you know reflecting underlying costs on delivering high quality cost effective care not being excessive not promoting you know high cost low value care as you think about you know now you're in my shoes as you think about the levers that we have in insurance rate review in hospital budgets even in the aco budgets what non confidential data could we use should we use and what actions should we take to ensure that we're funding the health care system right maintaining access to quality of care bending the cost curve and ensuring that these commercial prices are reasonable not excessive appropriate but cover the costs of care put yourself in my shoes what data should we be using that we have access to that's public and what action should we be taking gosh um yeah so that's a intriguing question the thing that honestly the thing that comes immediately to mind and i'm gonna i'm gonna show my naive today because i know you you all spend hours on these sorts of things but you know that i'm going back to your question about the national benchmark or or comparisons i think you said of reimbursement rates you know there there might be an opportunity to just start start with a certain basket of services and say that you're going to do these but there's a reference based price for those and and think about it next to medicare and medicaid but i know that as soon as those kinds of words are said i'm sure there's providers out there that would have issues with that i think vermont's health care system is unique in the sense that we have a very locally oriented health care system and that's why we love it you know we we want um the local hospital to be serving the local needs and we want the people in their their local communities to to have the type of services that they need and and uh that just does lend itself well to um sort of setting prices or or determining what the what the cost of those things ought to be because that each one kind of comes with studies so um as a quick off the top of my head the answer i think that's where i'd start but i'm i'm sure um i'm looking at the the medicare and the medicaid and commercial together um rather than having the commercial be the balancing item i think would be where i focus my energies okay thank you those are all my questions but if you do have follow-up on the benchmarks with within the association nationally and regionally that would be very helpful thank you mr chair thank you mike good afternoon miss green um just a follow-up on uh the beginning of the questioning that uh Jess just completed with um have you ever run across any um industry uh articles that talk about what the premium the appropriate premium would be for an academic medical center versus other settings i have i personally have not and to my knowledge i don't think we have that but i'm sure just like just asked about the uh battery reimbursement comparison nationally we might be able to to um see if we have any of that i can certainly take a follow-up on that one as well there was a recent youtube video from a physical therapist who practices at central vermont medical center and part-time and also at the private facility in essics vermont and um what she said and i have no other foundation other than what was on that video if it's accurate or not but she's saying that um it's 30 minutes at central vermont medical center that she's allocated for a patient and she gets an extra 15 minutes when she's at the the private pt clinic and yet um the private clinic is reimbursed at a much lower rate than central vermont i'm just curious what your thoughts are on those payment differentials yeah as i think jessica mentioned and we provided in our response to your questions that the price differentials in each situation is intertwined with the collection of services that any particular practice or or facility is is offering and they each come at it differently so it's not surprising that we we have such um differing price differentials to be redundant but it it's sort of like um these payment levels have grown over time and then they've adapted for each facility's mix of business and volume of business and they they um really would have to be sort of um you throw it up in the air and start over kind of a thing to to get some of those things to be exactly the same especially in in your comment chairman mullin i wasn't sure was was this person comparing um when you said private was it medicaid or medicare the public on commercial pay so it was all commercial pay so on that same uh um train of thought and uh um say that sometime in the future um years from now the board were to issue an order um that similarly situated providers in other words um if you were a uh pps hospital um that you would be treated the same as your peers in vermont if the board were to issue an order that there could not be greater than say 20 variation um in reimbursement to those how hard would that be for a company like blue cross to implement that it's it has to do with the motivation and engagement of the the people involved in that change so um i think you that's a great way to kind of draw a picture of what that that would look like the the markets in vermont are so unique that you'd have you'd have to have people in one end of the state talking about why resources should go to uh you know a practice or a facility at the other end of the state i think it would it would be very difficult to implement because of the just the um getting aligned on what what the actual result is but you know it's an intriguing intriguing idea okay um you were talking earlier in your testimony this afternoon about the class action lawsuits um both from the consumer end and the provider end and the fact that the consumer end um had been settled and that you had an 8.2 million dollar obligation is that a final number the settlement is the final number um and the settlement itself is still in the process of being finalized legally the thing that's uncertain at this point is the continued legal cost that it takes to to um complete that work so the there's a little bit of uncertainty around those costs but that's nowhere near the amount of money as the settlement so is there in this agreement that everybody has reached is there any guarantee that vermonios will receive a similar portion of the proceeds being distributed to consumers that i can't speak to directly i just know that the um the lawsuit process is uh going through the process of notifying subscribers nationwide of of this settlement and um do they do they we get them in the mail for other types of class action lawsuits where you need to sort of check a box and sign up for it so i think that process is underway do you know if everyone who did business with blue cross blue shield during that time period will receive something in the mail i don't personally know the rules for which years and which segments are included in that but again that's something that we can follow up with it's a timely discussion because um at lunchtime checking emails i received an email from a member of the green mountain care board staff that received a call from a vermoner who received a communication i thought um that it said email but it might have been snail mail um but in that email that i received and uh read um the vermoner thought it was um a scam and uh wasn't going to respond um how do vermoners know that um it's a legitimate um request of them for information and that they should respond versus doing what i would probably do and just assume it's a scam and just say no way well we we can certainly and i think we have made our service folks available if the person wants to call we can certainly follow up and see if they are on the list or if it is something that we're unaware of and therefore they should be very wary of it can you forward the email address that they should be contacting or a phone number that we give to people that uh contact us i'm sure the healthcare advocate would probably like it as well it's possible that those are already out there but i'll confirm um who what the right email is and uh who all is in the know about that super i appreciate that thank you that's the only questions i had i did want to just clarify one um thing actually before we move to potentially redirect miss green this is about the uh 138 point rbc impact in 2020 for the deficiency reserve accrual did i understand correctly that some of that's related to the rate guarantees that you mentioned in your pre-file testimony yes and then did i understand correctly that some of it is also related to expected covid costs that are not included in 2021 rates true yes have you calculated or has a blue cross calculated um how much each of those components is contributing to that 138 point rbc impact yes i can give you that information so the the total is uh i'll give you the dollar amounts and then we can sort out the percentage split but the dollar amount is the total is 29.8 million and that was the number that moraine calculated close at 28 but 29.8 8.9 of that is the covid related efficiency reserve and the balance is the other contract commitments miss ac do you have any redirect for miss green yes one question miss green or one topic miss green there was some discussion with board member usa for earlier about the pension fund contribution that was made by blue cross in 2020 as it was reflected in exhibit 23 and i think you spoke to this in your pre-file testimony can you go to your pre-file testimony exhibit 19 at page 16 the exhibit page 16 or yes the exhibit page 16 yeah the first bold if you could read the first bolded question and the answer um regarding the contribution sure as blue cross made any contributions to the pension fund since sustaining the losses and if so how much the answer is we contributed 13 million to the pension plan on december 23rd our pension actuaries estimated those amounts to be sufficient for the plan to maintain its 80 percent adjusted funding target attainment percentage or f-tap funding level for its january 1 2022 valuation note that this contribution is a cash flow item with no rbc impact our rbc outlook already incorporates our pension funding obligations the 13 million referenced there is part of the 15 million total contribution shown on exhibit 23 page 45 right and can you explain a little further why there's no rbc impact from the contribution itself so the the total rbc impact is calculated by looking at the all the asset values and the liability values and then to the extent that there's a total overfunding or underfunding that's what gets recorded in the balance sheet so the the 13 million or the 15 million whatever the cash contributions are that are made in a given period are already sort of taken into account in that valuation adjustment so it's it's 13 million is not on top of the 47 million it's it's part of it and the and the 13 million is not part of the 59 percent liability adjustment the 13 million to take it is not yes true i have nothing further at this time mr angoff anything further uh related to the redirect no sure i think at this point uh we should take a break come back at uh three 12 and then talk about an executive session okay so see you all in five minutes the the audio clipped out when you were telling the story before i didn't hear what the what the animal was that was in the pike it was a chipmunk uh i'm glad it was safely rescued and released sounded just like a little puppy though we were staying in an airbnb once in a pretty rural spot and a raccoon got stuck in like a weird crawl space in this house and it sounded like someone was being murdered oh great yeah it was it was nuts we all it was three in the morning we all ran outside you know the people who owned the airbnb lived like a quarter mile away like ran to their house like what's going on Kevin the other day that about we had two fisher cats kind of just outside our backyard uh screaming the night sounded like children being murdered yeah one of the neighbors posted on facebook that they spotted a mountain lion in our area oh wow yeah i feel like that's legitimately dangerous Kevin to have a mountain lion roving around where you live although it would be neat to see one that's very true okay so somebody went into the executive session prematurely i think oh Susan just started it never mind on monday we had somebody go to the wrong meeting that's why i brought that up i'm grateful for that Kevin i didn't mention your name but every board member knows who you're talking about so i don't do we have Maureen are you there is Ruth still with us and Kim are you yes i'm here great um so potential executive session uh to go into executive session uh there would have to be a motion that indicates the nature of the business of the executive session i have heard i think two potential bases so let me just talk about those a little bit the first one is uh for this is under uh one vsa 313 a six which is records that are exempt from access to the public records provisions of uh uh the public records act um there is a caveat with that uh criteria which is uh that discussion of the exempt record uh shall not itself permit an extension of the executive session to the general subject to which the record pertains uh so for example your year we've granted confidentiality for uh some aspects of rbc projections that would not allow you to discuss the general topic of rbc uh in an executive session um so there i've heard uh that there are some questions relating to material that has been designated already as confidential in the binders and then i also heard uh uh that there there would be a um discussion of contracts uh so the contracts exception uh this is one vsa 313 a 1 a uh there needs to be a finding um that premature general public knowledge would clearly place a person involved at a substantial disadvantage uh i think miss ac laid some groundwork for such a finding uh as well as miss green uh i believe in her pre-file testimony so any questions about that before i suggest some potential motions okay would any member of the board uh like to move to find that um public knowledge of blue cross blue shield of remands provider contract negotiations would place the company at a substantial disadvantage sure i move we find that uh premature public knowledge of blue cross blue shields uh provider contract negotiations would put them at a disadvantage is there a second second all those in favor of the motion please signify by saying i hi hi any opposed please let the record reflect that that was unanimous and then i think the second uh motion that would need to be made would be uh to go into executive session to take testimony uh regarding contract negotiations between blue cross blue shield of remand and providers and testimony about material that has been determined to be confidential in the exhibit binder so i will move that we go into executive session to take testimony on contract negotiations between blue cross and providers and to discuss material that has been determined confidential is there a second to the motion second may i ask a question yes since uh the motion is clearly saying that it's been found to be confidential what was the process for the finding was it just that somebody claimed that it was confidential or has it been agreed to by everyone that it's confidential uh so material that has been uh marked in the record has confidential there have been numerous confidentiality requests from blue cross each one of those have been evaluated by staff um legal department here at the board and we have issued um written determinations uh with respect to each one of those items uh and under the board's rules that means we have a duty to protect the confidentiality that information and that it can't be discussed in a in a public setting does that answer your question it does okay so i think i heard a second to the motion uh all those in favor of the motion please signify by saying aye aye again please let the record reflect that that was unanimous uh i think the next order of business would be to determine who uh needs to go to the executive session uh the board has discretion uh on that issue um barely all the board members all the attorneys uh for each of the parties are necessary miss greens necessary i think we had discussed paul schultz as being necessary um i always forget ellen e uh i would think would be necessary members of the board's rate review staff would be necessary um mike fischer yeah sorry uh the court reporter i thank you did i miss anyone uh this is bridget ac for blue cross uh we would just like to have martin brison lemia um who's part of the actuarial team in the executive session and i'm you may have included her in the lawyers but also rebecca heintz who's the general counsel thank you and i uh didn't mention mr fischer uh i think that would be appropriate mr hearing officer this is gabin boyles and the general counsel over at dfr and if i would be permitted in the executive session i'd appreciate it as well any objections to that i'm from the hta no objection i think that makes sense thank you okay then uh i would appreciate it if all those people would um hang up from this call and join the other call and if anyone does not have the invite for that please let you know now and christina could you um try and put up a a message on this did you really want to pick a time roughly i don't want that that's okay it's okay just wanted to ask i will put up a sign okay thank you