llion in AMT credit refund for that 36% RBC and it's fortunate that our members have the benefit of these AMT credits such that we are able to move towards the order range without adding CTR, higher CTR to the premiums as Paul testified earlier it's included as a top of page 129 but in the absence of those credits our CTR had to have been as high as 7% Mr. Schultz alluded to this earlier but just to be clear has Blue Cross received even a dollar of these AMT refunds yet? We have not we target to file our tax return by the end of this month and then the IRS will forward us the actual AMT refund that's evident in that tax return by adding the AMT refunds to reserves does that protect against future rate increases? Yes it does if we were not able to have the AMT credit refunds move us towards the new range the premium rates would have to go up in order to achieve the new RBC range Mr. Schultz can I ask you to take a look at Exhibit 23 from Binder 2 which was an exhibit from today Sure I have that Are you familiar with that Mr. Schultz? I am familiar with that Mr. Schultz Mr. Schultz can you describe that Mr. Schultz please This is an order from Department of Management but it was received a pilot request to provide good practice relating to the deferred tax asset resulting from the elimination of the AMT and can you describe can you describe to the board why this order was issued by DMR? The order was issued by DMR as it says in the document but I'll draw attention to a couple of key points one is when the tax cut and jobs act was passed in 2017 it took the unprecedented action of eliminating the AMT and I put in place a program if you will to refund the AMT credits to businesses over 5 years statutory accounting principles specifically SSAP number 4 requires that we record only assets that are available for paying claims in our annual statements at the end of the year so paragraph 6 you can see it summarizes pretty clearly that we are required the ability to meet policyholder obligations is predicated on the existence of readily marketable assets available for both current and future obligations and it goes on to say that any assets that are not cannot be used to allow policyholder obligations can be recognized in the balance sheet so it was deemed that the alternative minimum tax refund credits were over 5 years and the community practice adjusts the annual statement requirements such that those credits will be recognized when they're received Miss Green are you familiar with the DMR Solvency which is in binder 1 and I know it will speak to that but just briefly do you agree with the urgency conveyed by DMR regarding the impact of non-actuarially justified downward adjustments to blue crossing trades I do and do you agree with the conclusion of that report that given the level of blue crossing preserves and current circumstances a downward departure from the file bridge to be made with great caution yes I agree with that are you familiar with the factors that the board has required to consider in reviewing blue crossing rates I am familiar with the factors in addition and again Mr. Schultz testified to this earlier briefly that in addition to adequacy and solvency the board considers whether rates promote access to care access to quality care and are affordable yes the rates as file satisfy and start from the appropriate balance with all of those factors and as mentioned earlier most of these factors cannot be taken in isolation interdependent and have to be taken together in your view if a right is not adequate and the rate that's not adequate means that the cost of care and the cost to administer that care exceeds the amount of premiums that are being collected to fund that care and so an inadequate premium rate means that the contribution to reserve will be not met or in some cases will be negative and it will ducally reserve some of the an underfunded premium rate by definition will ensure solvency will by definition not support affordable care and quality of care and access to care because the ability for that to ensure for my access to care is undermined and is eroded over time are you able to address briefly for the board steps that Blue Cross pollution Vermont takes to promote access to quality care and blue cross pollution Vermont already went through many building examples of that where we take numerous steps beyond the items already mentioned we also have quality improvement program which can be hard to focus on member safety we also have high quality care management programs we also work very hard to maintain a cost efficient organization our administrative costs are very low my industry standard and we believe that also contributes to quality care Mr. Schultz also testified earlier about affordability and the standard for affordability and the balance between affordability and the other standards of the board could you provide your view on the relationship between affordability and access to care and quality care so there's an inherent tension between affordability of care and access to care Vermont policy has very high standards when it comes to access and quality of care and so to the extent of affordability and access there's a inherent tension in those two criteria and so any great reduction that's not actually sound or justified in the name of affordable actually there's nothing to reduce the cost of care so the access and the affordability play together in your view do the proposed rates meet the criteria the board must consider in reviewing rates specifically the factors of solvency, access to care quality care and affordability yes they do during Mr. Schultz's testimony some questions about administrative costs were referred for years so I'd like to turn to that what percentage of the file opinion reflects administrative costs? 7% of previous administrative costs has that compare with other insurers? when we do benchmarking of our enterprise costs with other insurers for the 2018 benchmark indicated that there was on average about 10 to 11% of premium administrative costs so our 7% is very favorably the L&E memo that is in Zipit 14 they outlined some work analysis that they performed it's outlined at the top of page 22 of Zipit 14 they compared our administrative costs on a percentage of premium basis with 63 other plans based on that comparison we ranked 50th out of 63 which meant that we had lower expenses for approximately 80% of those plans analyzed so we worked very hard to maintain competitive administrative costs and these we have a number of programs internally we have a grassroots program called Blue Ideas where all employees can make suggestions for safe money we've had hard dollar savings of $1,000 in the last four years from that program we also are very focused on maintaining or retaining and training our staff so they can perform their roles as efficiently as possible recognizing that Blue Cross's administrative expenses are low does however do you want to speak to the needs that Blue Cross does have for administrator play sources and staff yes I would like to do that administrative costs are the resources and technology that is required to achieve many of the results that were discussed in Paul's testimony so to the extent that we have to find to let the management program or work with the pharmacy benefit manager to improve or find better ways to address mental health services our members getting them access to the right care all of those activities require expert staff and qualified staff well trained staff and technology even the risk adjustment risk coding work that Paul talked about earlier does require that we spend time and money on achieving those results does the figure for administrative costs in the proposed rate assume a 3% cost of living increase for Blue Cross employees yes it does why is that increase justified the cost of living increase for staff is an important tool for Blue Cross to retain the qualified staff we find that at a higher turnover rate it becomes very costly to retrain people and build that expertise summertime the cost of living increase is very much something that is dictated in large part by the competitive labor market and we need to attract talent to some people to do important work we have a look at the impact that in order to reduce the 3% merit increase or cost of living increase to 2% it would have a very small impact on rates in fact it would have .036% impact on rates which is less than 1.1% so we eliminated the merit increase altogether and this had 0 it would have an impact on rate you mentioned that the employment market is competitive to have any examples of situations where Blue Cross had difficulty in filling a position we do have as a matter of fact in Paul's area we have been recruiting for a letter of actuary for over 6 months now and we are finding very difficult to find or candidates to consider we also have recently we have in the last couple of years been managing our total workforce to the level of about 440 staff members most of whom were working really up the hill here and recently we are now to about 15 staff members and we have a number of agencies that are working for we also as an illustration of how important it is for us to retain staff even the customer service representatives that are world class and do a great job they require a minimum of 8 weeks of training before they are even able to take a call you also mentioned retention as being important to Blue Cross's mission do you know how Blue Cross will show the Vermont's retention rate compares to other blues yes our maternal rate I guess is what we use internally is about 8% so that would be our retention rate of 92% and that compares a little bit more favorably than some of our other national plans which report the survey that their maternal rate is about so staying on this topic of administrative costs board member Kellan raised a question with Mr. Schultz regarding comparing the figure in binder 2 exhibit 21 on page 21 if the figure isn't violent for administrative costs is that something that you could address sure I can take that now and then if there's further questions to be able to respond to so this is exhibit 21 in binder 2 and I think the question is comparing the expenses that are on that exhibit to the actual or the random that is in tab 1 of the other binder on page 52 my notes as Paul testified when we do the rate filings we look at our total enterprise costs and how that's allocated to each of the segments and the 79 million dollars on page 52 near the top of the page is the total cost that we recognize as 2018 enterprise cost the costs that are reflected on page 21 of the exhibit 21 in the other binder is the statutory basis cost and I think Tom mentioned that the the piece of that but there's also a few other differences between the exhibit on page 21 and it also includes the federal insurer fee but also includes broker commissions and a few other differences so I'm happy to follow up with an exhibit after the fact if it would be helpful but I can cross reference the I think it's $57 million of expenses on that exhibit back to the enterprise exhibit enterprise costs would also include the cost for all of our entities not just the costs of Blue Shield and Vermont and the exhibit on page 21 is just the cost of the Shield and Vermont so the two numbers are online it's just from the statutory perspective there's things that are relevant for example they add in rent but we don't pay rent but the statutory counting rules require us to include rent as if we were living in a home office so that would be an example of something that is a reconciliatory so we can certainly provide a wish for that Ms. Greenard, you're probably with AMBest I am with AMBest what is AMBest's connection with Blue Cross and Blue Shield and Vermont AMBest is a rating company they produce financial strength ratings so people might be more familiar with either the four or movies as a financial strength rating company that will look at the financial performance of a particular company a rating that's recognized in the marketplace in terms of how financially strong is a Blue Cross Blue Shield and Vermont required to have a rating at the time? we are required to have a rating Blue Cross the Shield Association requirements for us to license the brand is having financial strength rating why does the association require these independent assessments? the association in their role where they're ensuring that all of the new compliance nationwide are spawned to pay claims this is a requirement to ensure that even if a long term is in North Dakota you know that the North Dakota Blue Plan is strong enough to the claims payments for those services provided that's one of the mechanisms that the association has in place to make sure that the Blue Provider Network or the Blue Heart Network is robust and has strong financial claims. what kind of investigation does A&S do to support its rating and outlook for Blue Cross? A&S performs a thorough review of our financials they send to us each year a long list of everything they'd like to hear about both in terms of our financial plans our financial results our corporate insurance our product development and our future business strategies we provide that information to them and annually they spend a whole day walking through all of that with us usually in November of December each year and then in they look at the end of year results and then in late New York early spring they will issue their updated crawl financial strength rating is that rating an independent review? yes it is based on your experience in this field is A&S generally recognized as having its expertise in this field? yes A&S is generally recognized they tend to specialize in insurance company financial ratings do financial services entities like banks and lenders rely on their opinions? yes they do I could refer you to exhibit 16 in binder 1 A&S rating an outlet for blue cross yes exhibit 16 is the announcement A&S anytime they make a change to a rating they're required to issue a press release was there a change this year in A&S evaluation of the blue cross usually Vermont? yes there was a change in the press release they changed our long-term issuer credit rating to the outlook they changed from stable to negative to negative from stable to your knowledge has this happened before? we've had this financial strength rating processing since 2003 this is the first time we're just going to change did A&S explain the basis for its decision? it did and as outlined in the note it was mainly partly known it talks about reflects A&S expectation that our risk adjusted capital will remain under pressure when leading to long-term and capitalization security they go on to talk about fluctuation in underwriting losses referring to the sharp losses during the writing results and at the top of the second page they specifically said the underwriting results over the past few years have been caused primarily by blue cross ownership of Vermont being unable to receive adequate rate increases of food through the state's rate review process in other words, premiums are being too low correct was that a conclusion that A&S reached independently of blue cross? so just to wrap up I want to just go back to where we started the file grade this year assumes a 1.5% CTR yes it does in your opinion if the board makes downward adjustments to the file grade they're not actually really justified it will happen to the CTR when the actual results are knowing the CTR would be a low target low and it may well lead to concerns so for example if the board approved a rate that on its face assumed a 1.5% CTR but reduces other assumptions in a way that turns out not to match experience will blue cross be able to make the contributions to reserves? it will not have contributions to reserve because after paying for health care services and for members and cross-reviewed clients there won't be any money left to contribute to reserves so it will in fact be a lower or a rate of possibly negative CTR and to put some specific numbers on that what would be the results of a 1% underfunding agreement? a 1% underfunding of premium translates to about a 3% completion of reserves and the reason for that to start comparisons is that the individual and small group business is a significant portion of our corporate insurance business and so 300 plus million of premium if we were to reduce that by 1% is a much larger number of $210 million to serve us for the number of reserves that is on the end of the year. that concludes Ms. Green's direct testimony Blue Cross will reserve the right to be covered in your bottle of time for minutes. I would like to question Ms. Green about is it at him which is labeled as a response dated June 14th when I came in fact on the day June 28th 2019 and also although it's not my confidential I've heard some discussion to the effect that Blue Cross would like to be in confidential and I'm happy to do it your way. Is it at 10 of binder? Binder 1 the June 28th 2019 letter from Spicer Monterey this one is not confidential we used that one submitted as a public document no part of it was identified as confidential so I don't see any issue in the questioning Ms. Green would you please turn to agenda 10 and would you please turn to page 5 of agenda 10 and would you please start reading on the last paragraph of forward bullet on page 5 beginning with the caps test and the jobs act the tax cuts and jobs act had two specific impacts on the Blue Cross which would have amounts to 2017 reserves that resulted in a net reduction of reserves of 4.1 million corresponding to current RBC first the tax law repealed the corporate AMT and made accumulated AMT credits refundable and therefore affordable as a deferred tax asset the AMT credits were previously assumed to have no economic value so this initially added 33.2 million to reserves could you please explain what a deferred tax asset is deferred tax asset is a reflection of the tax law that says that there may be some future tax benefit but it's not recognizable in the current years results well under under steps toward accounting principles but the deferred tax asset is recognized on the balance sheet it's on the balance sheet but it's not in the operating results and then you said in the next bullet that there's any I said out of this 33.2 million in under the tax threats under any I see times blue cross was required to not have 13.3 million you see that I'm not seeing that on the bottom of page 5 on the top pages under this formula blue cross should have amounted to I'm sorry any of you under this formula blue cross should have amounted to non-finite or new for reserves 13.3 million tax asset attributable to anti-crime you cite for the board but that any I see guidance is it's the statutory accounting principles that have special rules around how to value deferred tax assets in the any I see blanks and that formula how much value you can recognize in the statements can you tell the board where I find that guidance it's in the statutory accounting practices I don't have that here with me have you provided it I have not I could will you and can you explain then the formula pursuant to which this 13.3 million of the deferred tax asset balance is required to be non-advanced can you explain how that's calculated the calculation looks at the nature of the deferred tax asset and calculates the amount that's allowed and that determines the asset that's looked and then separately statutory principles require that portion of that be non-admitted because it's not available to pay for claims to policy holders and when you talk about the nature of the tax asset what do you mean the what gives rise to the tax that will come to you in the future so some tax codes we have tax experts that we use to calculate this specifically but each of the codes in the tax code will attribute reliability or an asset to a certain taxable piece of our business and that's all accumulated into the net deferred tax asset at the end of any given year is there any question in your testimony I didn't hear the very last one you said it's all accumulated into the net deferred tax asset at the end of any given year is there any place in your testimony or attached to your testimony or in any document provided by the public trust that explains how this 13.3 million is calculated there's a number of footnotes in the annual statement that show the various deferred tax asset calculations after refreshment memory of the details what's in there to see if the formula itself is shown in that footnote I don't want to put you on the spot it's unfair for me to ask you to do that now so that we can all understand how that 13.3 million is calculated so the 13 I don't know the the relevancy of the 13.3 when the tax cuts and drops act was implemented it required us to both address the existing deferred tax assets and that's what this relates to as well as it created new deferred tax assets in the form of these amt credit refunds so there the 13.3 is not the same item as the amt credit refunds so I don't know if that helps clarify so that 13.3 million that is not admitted you say is not all amt credit money it's amt credit money plus something else the statutory reporting rules there's deferred tax assets before the tax law change occurred and so 13.3 relates to those deferred tax assets outside of an amt credit refund and I hate to ask you this but can you try to be a little bit more like Mr. Schulz and talk a little louder sure thank you very much are you sure that the guidance requires the non-emission of this 13.3 million rather than provide discretion for its non-emission it's a formula you're sure about that now what about the other none of you see the first bullet on the top of page 6 yes that has to do with the 19 or 9 million of amt credit right the balance and that's not required to be non-emission right because the formula requires a certain amount to be non-emission that the remaining is an asset that's right but that remaining 19.9 million you didn't reflect on your annual statement right you did not include that 19.9 million in your surplus for your end 2018 correct that is correct and why is that it's because the we requested a permitted practice of financial regulation one that we mentioned earlier and the request was to not limit the balance of the amt credits because they were not they're not assets available for the use of paying claims until we receive the tax refunds okay is it fair to say if there's some question about the ultimate receipt of the tax that should be admitted I'm going to phrase that under such strong county principles is it fair to say that if there is a reasonable question about the ultimate receipt of the asset that the commission has discretion to establish a permitted practice allowing for the non-emission of that asset it's less to do with the probability of it being received without is it an asset that's available to be used to pay claims and since it's not cash in our door yet the permitted practice allows us to not admit that asset but under statutory accounting principles without the permitted practice allowed you would reflect this on your balance you would reflect that 19.9 million unbalanced sheet as part of the circles correct without the permitted practice yes and by the way there's no confusion about the language what you all refer to as reserves is what the NEIC in its annual statement blank and to my knowledge both insurance departments refer to as surplus right insurance departments refer to it as surplus and the NEIC point of calls it total-adjusted capital capital and surplus online exhibit 21 on the 5-year history is how total-adjusted capital okay and you agree with me that on page 5 of the annual statement they essentially use it it's called capital and surplus sure you will cross us for permitted practice to not admit the 19.9 million in the end amt corrects the as I testified earlier the elimination of the amt was unprecedented and it had a 5-year time horizon attached to it and the statutory accounting principles require us to only reflect assets in the annual statement if they are available to pay policy holder claims and funds and so since the amt credit refund is not an asset until we receive it we requested the permitted practice to remove that from the surplus well it's pretty clear isn't it that Blue Cross is going to get the 17.9 million in October 2019 that's what you say I expect that correct and then also it's pretty clear isn't it Blue Cross is going to receive the additional 8.7 million in October 2020 correct that's our expectation okay and I suppose there's not going to be an election until after October 2020 correct national yes that's true nor a congressional or statutory election so it's reasonable to conclude isn't it that those two years are pretty certain that is that the amounts that you're going to receive in those two years is pretty certain that's true that's why we included it in our RBC plan right but under statutory accounting principles without the permitted practice you would have to include that on your balance sheet today as part surplus with you 19.9 million okay and I and you wouldn't agree that you would have to include the 2020 amount the formula allows only a portion to be admitted and so without the permitted practice it's the balance whether that relates to 2020 2021 or 2022 the formula doesn't necessarily break cleanly with the year the yearly split but in a sense it's the same concept when 19.9 would be on the balance sheet without the permitted practice okay so you agree about the 19.9 when you argue about the remainder correct that is when you agree that by 4 the permitted practice the 19.9 million would be admitted and would be reflected on balance sheet and included in surplus yes and the other part the remainder you're unsure about the 19.9 between the 13.3 and 19.9 it is the total we're sure that according to the rules the whole 34 million is going to come to us it's a question of when and when will it become available to use to make claims could you turn please to page page 2 in exhibit 10 and you see there the bottom it's not a chart it's just a list of the amounts in the years of the AMB refunds okay and then you can read the sentence right after that so could you explain to the board what you've been on doing then is it fair to say that even when you do receive these anti credit refunds you don't plan on putting them in surplus rather you plan on using them to offsets of seniority liabilities it says that in the few years above we've made estimates our tax position is by definition a consolidated enterprise tax liability so when we calculate how much we care with all of our taxable entities in our tax return and that's what that's referring to the Blue Cross parent is not a taxable entity right we have a we have a taxes because we have a special section in 33 of the tax code that speaks specifically to new plans and is through that tax tax regulation that anti credit came to be the first place under the Trump tax bill going forward I'm sorry I didn't mean to interrupt you go ahead going forward Blue Cross in Vermont has a zero federal income tax rate say again please going forward Blue Cross in Vermont has a zero percent federal income tax rate that was my understanding what are the seniors in Blue Cross we have the Vermont Health Plan we have Vermont Collaborative Care we have CBA Blue these are all sub-seniors we have account amount of insurance services these are all companies that make up the entire operating entities of the Consolidated New Cross will shield the Vermont tax return okay and that is fair to say that your intent is to use the anti credit refund refunds to offset the tax liabilities of Blue Cross of city areas the nature of our tax return is such that any tax liabilities that arise out of the related entities will be first the anti credit refund will be first used to cover those liabilities and that is the balance that comes to us from the IRS I think that was a yes yes could you explain to me the difference is a relatively moderate difference but why there is a difference between the 34 million in anti credit refunds that you use in question 2 in your answers question 2 and the $3.2 million number that you use in your answer to question 6 let me amend that question so we can maybe resolve it all at one time and then in your answer to the last question question 8 you use a $35.8 million number these are not huge differences but could you explain why the differences depending on how the question was asked we answered in the context of the exhibits that were being asked about so depending on which exhibit and the statutory statement you're looking at one of the 34 is a going forward view of 33.2 is how it was reported at the end of the year could you please turn to the exhibit 21 who crosses annual statement for 2018 okay and I think I heard you say when you were being questioned by council that the property of your surplus is mainly due to underwriting losses is that correct? yes okay could you go through with us on page 5 of the annual statement page 6 of the exhibit 6 the various entries there to explain how surplus went from $134 million in the 135 million in prior year to $110 million there down on line 49 so just so I'm fair you're on exhibit 21 page 6 of the exhibit 21 page 6 of the exhibit page 5 of the annual statement we're starting to see on top of $134 million for the current year okay and then there's a net income in this case a net loss of $6.7 million then down on line 36 there's a change in net unrealized capital gains less capital gains test of $4.6 million could you explain what that is? the net unrealized capital gains related to the asset portfolio that we have that backs the reserve surplus and to the extent that the capital gain position in the market goes up and down in a given year that will increase or decrease surplus okay so does that mean then that you lost $4.6 million well let me rephrase that you have to realize these gains and losses right? correct that means that the value of your portfolio went down by $4.6 million? correct okay there are on their statutory or regular regulatory requirements that require a blue cross and hold no more than a certain type of asset correct okay and what is the requirement with respect to equity holdings? off the top of my head the the state regulations excuse me the state regulations have a a garden rail for the amount that can be invested in equity which is very small some of the bonds will also fluctuate in terms of on your life's gains and losses as well the experience and insurance companies are required to hold pretty safe securities holdings that's true and when we benchmark against peer companies and look at our we review our asset portfolio every year with our board and we have a relatively conservative asset position and we have somewhere between 50 and 20% of the consolidated entity and equity position and the rest would be in high quality fixed income bonds high quality fixed income bonds do you know that 15 to 20% is relatively high for an insurance company? it's not very high in industry terms what about for a non-profit blue cross company? do you know whether it's relatively high for a non-profit blue cross company? if the many insurance companies use equity securities to back their surplus because it's a long-term growth and you'll get a longer term a creative growth to surplus out of equity securities and a lot of other types of securities on line 48 it says changing that deferred income tax what does that mean? so that's a change in all of the deferred tax assets that we were just referring to so that means that you have the assets increased in between the end of 2017 and the end of 2018 the net deferred tax income income tax increased between the end of 2017 to the end of 2018 and changing non-grid assets on line 39 what's that? those are the assets we were just referring to earlier that to the extent that statutory accounting rules require us to remove assets from the balance sheet that are not immediately available for paying claims those are required to be taken out of our balance sheet does that include some of the amt credibly fine money? it does and you can see in the prior year that the major driver of the 46 million was the removal of the non-grid amt deferred I'm sorry I'm having trouble hearing you the major driver could you say it again to get it out of the major driver? I'm saying yes the alternative minimum tax credit refund that creates the deferred tax asset was removed through this change in non-admitted assets from reserves and then finally then on line 47 when it says aggregate ratings for gains of losses in circles could you explain what that is? yes it's usually in our case it's the change in our pension valuation so at the end of each year the pension plan is valued both the liabilities in the assets and to the extent that the assets are lower than the liabilities that we create a reduction in member reserves as outlined in 2018 in the current year on this exhibit of 5 million so your pension plan assets decline in value correct? at the end of 2018 they did and that's in addition to the decline in value that we talked about up here on line 36 right? correct so that's about just about almost 10 million declining in the value of your portfolio it's great that there are other practices across engages in that I think it's so close to appear to be lower than it really is would you turn please to pay to 2017 that in the first first time well let's say first turn to page 37 of the exhibit page 13 of the acting health department's report and the acting health department's report this is a report that you all committed correct? yes you see the heading in the middle of the page reserving process and accuracy yes I see that could you please read that paragraph AHP discussed the process with its certifying actuarial capsules it was confirmed that reserve estimates are calculated with a benefit of one month of paid run out and then an explicit provision for adverse deviation of 15% which is usually held in the year end reserve estimate and when could you go to page 14 and just read the last line of the top paragraph the incomplete paragraph there read which part of it read which part of it the last sentence of the first paragraph which is starting with AHP consultants ok AHP consultants believe that blue cross blue shield Vermont could potentially lower its explicit level of provisions for adverse deviations which would result in both higher surplus level and higher army C ratio do you agree with that statement by the consultant that you commissioned I do agree with that and I go on to say that the decision was made at the end of 2018 to change the approach that we've been taking for that provision for adverse deviation such that it's applied to just the incurred but not reported portion not the to reflect the fact that we have a one month's planned run out we are required to have a provision for adverse deviation again as required by the Cali principles could you turn down to page 15 of the same exhibit which is page 10 of the Oliver Wyman sorry could you repeat that in the same exhibit 17 could you turn to page 10 of the exhibit I'm sorry page 15 of the exhibit which is page 10 of the Oliver Wyman what was your from earlier I'm there thank you and could you read the last two sentences of the third bullet reserve in the process the two sentences beginning with Blue Crossville Shield of Vermont Blue Crossville Shield of Vermont holds an explicit margin of the percent on top of their best estimate which is conservative as a result from 2007 to 2016 Blue Crossville Shield of Vermont with margin has never been deficient with the lowest reserve of sufficiency being 13.6 and the highest being 24.9 percent paying between to not including the initial charge for the serving process risk and you agree with me don't you that if that reserve redundancy of the first year of sufficiency were included in service the Blue Crossville service would be higher if we eliminated the explicit margin reserves policy over reserves would be lower and so plus would be higher yes and similarly your RBC ratio would be higher correct yes could you go now on this same page page 10 of the Oliver Wyman to a quarter page 15 of the exhibit you see the bullet from the bottom provided reimbursement you see that yeah I do okay and you see at the end of that bullet that Oliver Wyman notes that Blue Cross reimbursement levels are on par with its competitors and better in some markets you see that I do and by better they mean higher you know they they said they don't mean lower do they no they mean lower you mean this is what the provider reimbursement is the amounts that we take providers right and you're saying that you believe that what they mean there is Blue Cross when Oliver Wyman says Blue Cross is reimbursement levels are on par with its competitors and competitors and better in some markets what it's really saying is Blue Cross is reimbursement levels are lower in some markets lower reimbursements yes well that does that make sense though given the first sense in this paragraph the first sentence the provider reimbursement risks are considered to be potential that Blue Cross for children will need to increase provider reimbursement to maintain provider relations does that make sense yeah I mean it isn't fair to say that Blue Cross doesn't have additional provider reimbursement risks because they're already paying providers enough and it isn't that well I know you're not Oliver Wyman it would be better if I asked him but it isn't pretty clear that what they're saying is Blue Cross because they pay to provide them so well we don't have any risk about providers to whom else we're now this is I think this is speaking to as the Accene reports spoke to as well that if if we were providing if we were paying providers more than what other payers were paying our rates would be less competitive so they're saying that we don't that there was they did not include an additional charge meaning an additional risk to reflect that because we reimburse on par with competitors and better i.e. lower in some markets alright let's move on are you familiar with Blue Cross's statutory obligation to ensure that subscriber benefits are provided at minimum cost under efficient and ironable management I am familiar with that thank you Ms. Gray Mr. Schultz earlier if your company had a preference for where you would be in your RBC range and he indicated do you agree with that I do agree with that I would like to add however that the utility of having an RBC range is such that results will go up and down over time and you would find the Blue Cross and Schultz are not RBC at different places within that range so it would be as in the subsequent study from Maxine we identified our risk tolerances and one of the risk tolerances that we have is that in any given year we are going to fall outside of the range so that risk tolerance implies that we want to be higher in the range than necessarily on the bottom of any given range because if you are talking on the bottom in any given year you have much higher on the outside of the range so you actually would prefer to be higher in the range than lower in the range given your risk tolerance on average speaking of your consultants and the range could you turn to exhibit 17 please yes and as you noted the consultant had targeted a particular level yes and that 690 is that correct the 690 is the place within the desired range of 590 and 7.5 that is likely to fall if we were at 690 we would be at least likely to fall outside of that range in any given year and that recommendation was based on Maxine's understanding of your company's risk tolerance among better factors it has less to do with risk tolerance and more to do with the analysis they did on this and the volatility of results in our business and our ability to respond to great changes in the case of volatile results so their statistical analysis resulted in a range of 590 to 7.45 and it did incorporate our risk tolerance since yes but you would agree with me that on page 40 of that exhibit under risk appetite the consultant indicated the selection of the surplus range is ultimately a management decision and that their recommendation is based on an understanding of your tolerance of risk and uncertainties in a business environment etc could we turn to exhibit 690 this is the and best press release and I believe that you were asked by your council if this was and best independent conclusions contained in this release and you indicated it was is that right? and do you know the basis for their independent conclusions? they through their analysis and looking at the CTR and the end writing results and the performance of each of the lines of business that's how they come to their conclusions but it indicates on page 2 it talks about that Blue Cross being unable to receive adequate rate increases improved through the state's rate review process how would they have formed that opinion? they look at the rate filings and the decisions and like anyone else we would also look at the writing results so they're looking at in fact the rates have been inadequate in recent history and then through our rate review discussion when they come to meet with us it is something that we've talked through with them about the results of the decision orders so you've met with them to speak about the process? yeah they come they go through and they request a variety of information and you can provide that to them great thank you everyone has a question? I'm going to try to give you this there's a lot of like different definitions of administrative costs from all of this to two or three variations of it in the National Association of Insurance Commissioner documents but let's just start and hopefully finish on an exhibit of page 21 which we've been there before and I appreciate your comment I'm asking this question not to get certainly clear answers today but I appreciate your comment earlier that you take a look at this so that you can respond to it appropriately so my basic question is again looking at this page which covers cost and expenses to adjustment expenses in general administrative expenses it comes to a total of $57 million as you noted earlier and but it includes credit of $33 million for $39,917 that comes from your uninsured book of business so to combine them out there is almost $91 million in total what I'm interested in also in the annual supplement is an allocation year by year of the covered lives by book of business and I'll take a quick look here if we go to again the five year summary of these numbers that the entire book of business enrolled in exhibit one total numbers at the end of the period $198,448 and that is you'll find elsewhere in the supplements the split is $111,404 covered lives including uninsured book of business and $87,041 for the insured book of business just because I've had a couple of conversations people get confused by this you're uninsured are where you basically have the administrator functions for those policies but you're not at risk for the claims as a simple kind of understanding so that's what uninsured means so if I do the simple math here and this is my question if I do the simple math and take the $33,439 for these three categories of expenses and divide that by the covered lives it comes to $300 and $0.16 for the uninsured and then I take the insured amount the remainder of that $57.5 million divide that by the insured population covered lives which is $87,041 I get $661 per covered life and so my basic question is can you explain that difference as to why why the kind of per covered life amount for insured folks it's much richer almost by twice than the insured one of the things that I can provide to as a follow up as well when you talk about different definitions of administrative costs one way to simplify would be to have the same total of administrative costs but many of these sort of whole segments of that into different sum totals so there's not it's not like we categorize administrative costs sometimes it's always categorized that way but it's reported often what I liked about this is that it's very explicit it's cost-containment expenses other claim adjustment expenses and you can go back into the NAC documents and see that fight the individual plans by the small group by your Medicare folks so it allows you to go into the weeds a little bit but you still can't find an answer yet that that says why one group should be almost twice as costly as the other the main driver for the main driver the main driver for each of our lines of business requires different types of services to be offered one of the large differences between the individual's longer book and the uninsured is that the uninsured or we call it self-funded those clients tend to be much larger clients so there's one group that has many many uninsured members within that group and that becomes very much more efficient for us to administer because when we're administering individual by individual or each small group we have to set up different benefits for each of them and this is voices multiple times and smaller groups and in the larger groups we'll have to do one for example so the major driver between the cost uninsured business versus uninsured business will have to do with the size of the clients that are in that book we do have Medicare supplemental business has a much different cost profile it's the premium that we're collecting from Medicare supplemental it's a much smaller premium but the uninsured cost is very similar to another type of policy so the percentage of premium prevents will be much higher we look at our benchmarking we'll actually look at the benchmark by one of the business as you can show us I appreciate it I just know that the population was concerned about here I think exploring that would be helpful