ver it is, four plus points of RBC ratio? Is that correct? Objection, not relevant and ask and answer. And I apologize. I was on mute. I would have objected from the beginning of this line of questioning. I apologize. So I need a repeat of the question. I'm sorry, Mr. Chairman. I didn't hear you. I need you to repeat the question, please. Yeah. Is it correct that in order to arrive at the number of RBC points that a loss equals, you've got to multiply the amount of the dollar loss by a certain factor. Objection to the form of the question. And I'd like to add another basis for my objection, which is, in our June 26th letter from Don George, Blue Cross requested that the board and parties, if they had questions about the pension loss, provide those questions in advance in writing. There's nothing about these questions that couldn't have been developed ahead of time. So those are all of my grounds for objecting to this line of questioning. Mr. hearing officer, Mr. hearing officer, nothing could be more relevant to the board's decision. I'm not supposed to propose. And the fact that Blue Cross has lost 180 points in RBC ratio through no fault of the Vermonters through only its own fault. The reason it is so relevant is that, as Mr. Schultz just explained, reason it is so relevant is that the lower the RBC ratio, the more Blue Cross needs to charge, it needs to charge its rate payers. Now, the board's counsel asked Blue Cross some very, very reasonable questions about this investment, about what it was, how it came to be, whether it complies with the law, whether Blue Cross notified the commission, very reasonable questions. And what Blue Cross told the board was to go jump in the lake. They said, we're not answering your questions. I think that it's essential. It's essential for the board and it's essential for the board on behalf of Vermonters to insist on answering those questions, because that money that they threw away is, I'm afraid, going to result in higher rates to Vermonters, unless Mr. Schultz can guarantee right here that it never will do that. So the question that, sorry, I'm getting some echo here. The question, as I understood, it was about how many RBC points does a million-dollar loss equate to. That seems to be relevant. So to the extent I understood the question correctly, Mr. Schultz, could you please answer the question? Yes, happy to. A million-dollar loss equates to about four and a half points of RBC. Thank you. And Mr. Schultz, could you give the board some idea of how much 40 million dollars it's? For example, what percentage of Blue Cross's total surplus before that loss does that 40 million dollars represent? I think Ruth Greene is going to be in a better position to answer that question. And I could try to find the number of our surplus and do a little bit of quick math, but we're probably better served by asking our CFO the answers to those questions. Well, I suppose that's fair. Dr. McIntosh said you answered the questions. Now you're throwing Ms. Greene under the bus. Fine, I'm happy to ask. Subjection, objection. Sustained. Happy to ask Ms. Greene. Can you tell me, you're responsible obviously for the rate filing, correct? Yes, that's right. Can you tell me how this 40 million dollars that Blue Cross lost in this investment compares to the contribution to surplus, or as you guys call it, contribution to reserves, that Blue Cross has filed for and been granted from the board in its history, that is, since the new ACA system started up. Subject to the form, answer if you understand the question. I'm going to need a little bit of clarity on that question, if you don't mind. Sure. What is the total that in dollars, approximately, that Blue Cross has received from the board in, that is, that the board has approved in contributions to reserves or contributions to surplus since the beginning of this system with the board regulating rates? So I'm referring again to page 163 of exhibit one, which I think doesn't quite have all the information I would need to do that calculation, but I can see that the approved contribution to reserve every time has been about 0.3 percent of premium. That is probably in the neighborhood of about six million dollars. Okay. And the system is going for six or seven years? That's six years of experience. Yeah. Okay. So that's six times, I'm sorry, about six times six million dollars. No, I'm sorry. So each year the board might approve a different CTR. Our expectation after the 2019 decision, for example, is that our CTR would be zero. So in 2019, we can compare that 40 million dollars to zero. In 2018, we expected that our actual CTR would be negative. So now we're comparing to a negative number. Okay. Mr. Schultz, can you guarantee that Blue Cross policy holders will never pay directly or indirectly for the 40 million dollars that Blue Cross has lost in this investment? Objection. Hold on. Objection on what grounds? It's asking the witness to do the impossible, essentially. Okay. Guarantee the outcome of future events? Well, you can answer for himself. Mr. Angoth, could you please repeat the question? Yes. Mr. Schultz, can you guarantee that Blue Cross policy holders will never pay directly or indirectly for the 40 million dollars that Blue Cross has lost through the investment that it made this year? Object to the form, you can answer. What I can say is that we're here today to talk about the 2021 rate filing and that not a single penny of that 40 million dollars has been included in the 2021 rate filing. That was not my question, Mr. Schultz. I'll repeat my question. Can you guarantee that Blue Cross policy holders will never pay directly or indirectly for the 40 million dollars that Blue Cross lost in connection with its investment this year? Objection. To the extent Mr. Angoth is asking a question that projects beyond the rates before the board, the question is seeking testimony that's irrelevant. Then I think it couldn't be more relevant. This board regulates the rates, decides whether to approve or disapprove the rates that Blue Cross filed. Correct. The board has jurisdiction over the filed rates before it, which are the 2021 rates, and that question's been asked and answered. It's been asked. It hasn't been answered. What is your response to the objection, Mr. Angoth, that the rates before the board go for 2021 and do not extend beyond, I mean, to the extent that he's answered the question as it relates to the rates for next year? My response is the board has the authority over rates not just this year, but for next year. In addition, my response is that the answer to Mr. Schultz's question, if he does answer it, I think would have an effect on the board's decision as to what to do with respect to the rate increase this year. So, for example, if Mr. Schultz were to say, yes, I can guarantee that no way, one way or the other, will Blue Cross charge its policy holders for the $40 million that Blue Cross lost, that might have a different effect on what the board's decision would be than if Mr. Schultz were to say, I can't guarantee that because 180 points of RBC ratio is a lot. And it turns out that because of this 180 point loss, the RBC ratio falls to a low level, say below 500. Unfortunately, regrettably, we're going to have to raise policy holders rates to pay for it. So, clearly Blue Cross Blue Shield's solvency is an issue before the board in the impact of the rate on solvency. Clearly, the pension loss has an impact on solvency. I think it's relevant over what time period that impact will be felt. I'm going to allow this land questioning, but yeah, so proceed. You can proceed with your question, Mr. Hangoff. Can the report, well, should I add, Mr. Herring, should I ask it again or should I have the reporter read back the question? How would you like to proceed? Could you please restate the question for the witness? Yes. Mr. Schultz, can you commit to the board that Blue Cross policy holders will never pay directly or indirectly for the $40 million that Blue Cross lost this year through its investments? Quite frankly, that decision is above my pay grade. So, no, I personally cannot make that guarantee one way or the other. I will move on. Thank you, Mr. Schultz. Mr. Schultz, to what do you attribute the great success that Vermont and Vermonters have had in containing the coronavirus pandemic? Well, Dr. McIntosh is the expert in this area, so I would refer to her testimony. She's already testified about this. She's asked and answered. I rely on her expertise in these sorts of matters. They really aren't an actuarial matter. What Dr. McIntosh testified to the best of my recollection is that she gave a lot of credit to the governor. She gave some credit to good fortune as well. I appreciate that. Do you have anything to add to what Dr. McIntosh testified to? I have nothing to add. Very good. You remember, when I asked Dr. McIntosh what she assumed in the modeling that you and she and your teams had done as to how much Blue Cross would pay out this year due to the coronavirus, she said she didn't know and I should ask you. So consider that question asked. I'll ask a series of questions. Number one, Dr. McIntosh testified that today the number of cases per day varies between 17 and 2. The range is between 2 and 17. Do you remember that? I do remember that. What did you assume as to the number of new cases that Vermont would experience per day in coming up with your projections that you set forth in the addendum, which I believe is 17? Yes. In that modeling, we assumed that Vermont would see 7 to 8 additional cases per day, which matches the average from June forward. You assumed that Vermont would see 7 to 8 cases a day for the rest of the year? Yes. And then what did you assume as to what would happen in 2021? So we assumed a couple of things. I should clarify my original response. So we did assume that through August Vermont would continue to see 7 to 8 cases per day. From September through December with the potential return of students to schools and to universities, we allowed the modeling to vary from between that 7 to 8 level to something as much as I believe 10 percent higher than that. And then for 2021, we allowed the model to take a random variable, again choose a random variable anywhere between the 7 to 8 cases a day and a maximum of about 15 to 16 cases a day. Okay. I was just going to say, I wouldn't quibble with you about 10 percent, one or the other, but the difference between 7 to 8 and 15 to 16 is pretty significant, isn't it? How did you come up with that 15 to 16? Yeah. Again, that's based on an expectation over time that as we continue to loosen social restrictions, Dr. McIntosh testified about in the fall and winter, especially when everybody is within enclosed spaces, it's likely that the virus is going to spread more rapidly than it has thus far. So we included that full range of where we are today to a level that's about twice that high and allowed the model to randomly select a value within that range. So some of our simulations say that the infection rate in Vermont will never be higher than what it's been in June and July. Other of our simulations take a look at what happens if that infection rate is about twice as high. Based on everything Dr. Kate testified about, it seems pretty unlikely that the infection rate is going to decrease from here. Can you show me where that data which you just described is in your modeling addendum exhibit 17? I can certainly try. So it should be addressed in the treatment cost section and I will direct you to page four of exhibit 17, the bottom of page four. We talked about how we dampened the incidence rate and so we dampened it by about 50%. That's because that seven to eight new case average that we've seen in July and in June is about half of what we saw over a time period that was studied by the Society of Actuaries from March 22nd through May 17th. The Society of Actuaries studied these infection rates by Medical Service Area for the entire nation and what they found for the Burlington Medical Service Area and this also tied very closely to statistics reported by the Vermont Department of Health is that over that time period infection rates were about at twice that level of seven to eight that we've experienced in June and July. So when we talk about the 50% dampening that's another way of saying we're assuming seven to eight new cases a day for July and August. So you mean in earlier in the year in March and April there was a greater incidence of cases in fact twice the incidence of cases that there is currently? That's right in March well late March and very early April in fact the incidence was was many multiples higher than what it is currently and then that dampened by the end of April to a level of about four cases a day and that's what we experienced for much much of the month of May. So when we look at that Society of Actuaries timeframe that includes both the very large spike we saw in March and April and it also includes a very kind of a long portion of the very low incidence we saw in May before some of the social distancing restrictions were loosened. So if I understand you then the the trend in obviously everything's starting from a very low base but the trend in coronavirus cases in Vermont has been down since March but you're projecting a higher incidence later in the year why is that? No I'm sorry let me explain again I think you're misunderstanding what I'm saying. So we're projecting that for July and August it will be about 50% of that time of the level of that time period from March through May that includes some much higher incidence and includes some very low incidence that 50% assumption matches the seven to eight cases per day that we've seen in June and thus far in July. So for July so far it's been a very accurate assumption. Okay if I'm interested and if the board is interested in hard numbers, pure number of cases, number of infections, number of hospitalizations, numbers of deaths, is that in here? Is there any place where we can find something to the effect that we assumed eight cases or 16 cases or we assumed 60 deaths or 90 deaths? Is there anything like that in this in this addendum Exhibit 17? No we did not summarize our modeling in that way. Okay you remember also Dr. McIntosh testified that even though there was just one hospitalization as of June 30th today there are four and they fluctuate between one and four. Do you remember that? I do remember that. What did you assume as to the number of hospitalizations from here on out during the rest of 2020 and then for 2021? So again we didn't summarize our modeling in that way. I'd be happy to follow up with that answer. That answer is going to be very low. We're assuming seven to eight new cases per day across all of Vermont. Blue Cross and Blue Shield insured business accounts for well under 10% of the total Vermont population. So just in terms of new infections we're expecting within our insured lines well less than one person per day. Now hospitalization we took again from we've used some national statistics for that some published data for that and we compared it to Vermont data on Vermont hospitalizations during the peak period to understand how many positive cases tend to result in a hospitalization. So I'm going to avoid doing math on the fly but the hospitalizations per case was obviously well less than 100% way less than 50%. So the number of hospitalizations of Blue Cross insured members that we're assuming is going to be very very low. Okay well then let me ask you this. Can you turn to on exhibit 17 page 22? Sure. Okay I'm there. Okay and you see the first number under 2020 is 339 million you see that? Yes I do. Okay of that projected paid claims of 339 million how much of that is paid coronavirus related claims as of whatever the data is that Blue Cross has those those numbers available. Well zero those are baseline claims in the absence of coronavirus. Okay then where are your where in this addendum is your estimate of coronavirus claims costs in 2020? Sure so you can see that in the direct costs row so we have these as I as I testified earlier we have these various scenarios as to what a second wave might look like. So let's for the sake of simplicity stick to there is no second wave. The direct costs that we're paying for coronavirus treatment are projected at 4.3 million dollars which that is just over 1% of the total claims projection for the year. Okay leaving approximately 335 million dollars in non-coronavirus related claims correct? Again the 339 million dollars is a baseline number so the 4.2 million dollars would increase that 339 up to 342 I'm sorry 344. Okay of that 339 million in projected paid claims how much has Blue Cross paid to date? So the the question as I understand it is what what is the total amount of paid claims that Blue Cross has paid through June and I don't have that number at my fingertips. Okay could you please submit that number to the board and to the healthcare advocate so we can use it in our post hearing memorandum? Yes I can. The reason I asked that if you could delve Mr. Schultz to page two of exhibit 17 and read the first line of paragraph three. On July 7 Blue Cross's actuarial team completed the monthly incurred claims estimates that incorporated claims paid through June 30th 2020. Okay so that's you can understand why I would be asking that question can't you because this statement says we incorporated the claims paid through June 30th 2020 so it is maybe it is our paid claims paid through June 30th 2020 in this addendum at all. Yes well the the amount is not in the addendum so its claims payments to date are in the modeling. Okay that's what I'm asking for I'm asking for the amount of paid claims how much has Blue Cross paid out so far in 2020 I thought from this statement that it would be in the addendum you've just told me it's not correct. That's right. Object to the form of the question. There's a testimony in there from council. Why is it not in the addendum? Because it's not particularly relevant that specific number is not particularly relevant to the modeling. Other numbers like the amount of deferred care are very relevant to the modeling and those numbers are reported within the addendum. You don't think the board should be able to decide whether the amount of paid claims that Blue Cross has made in 2020 is relevant or not. Object to the form of the question you can answer if you can. So Mr. Angolf I would say that I did not include every possible number within this addendum within the limited amount of time I had to put it together I included what I thought was the most relevant information for the users of the addendum. If the HCA or the board would like to see some additional information I would be more than happy to provide it. Thank you. I will accept that offer. Yes we would like to see the paid claims data and I assume that I won't speak for the boards but the HCA would certainly like to see the paid claims data to the extent that it is available for 2020. Could you turn please Mr. Schultz to page three and I just want to ask you a question or two about certain terms. I know of exhibit 17 are you there. I am. The first full paragraph the second line the second sentence talks about completion factors and margin. Could you just explain to me and to the board what a completion factor is and what margins. Sure. So a completion factor is an estimate of given paid claims through a certain date. What will the total incurred claims for a given period be. So and what I mean by best estimates before margin is that for purposes of financial reporting we are required to use estimates that include an element of conservatism. We removed that element of conservatism when performing the incurred claim projections for this modeling. And what if anything is the difference between margin and profit. There's a huge difference between the two. We're a not for profit. There is no profit anywhere in anything the Blue Cross Blue Shield of Vermont does. What margin means in this context is that again we are required for statutory accounting purposes to include some element of conservatism within the projections that we're doing. That's a requirement because statutory accounting requires that we consider moderately adverse conditions when we're putting that accounting together. That's not a decision Blue Cross makes that's that's a required element of that accounting. So when we're using margin in this context it has absolutely nothing to do with profit. It doesn't even have anything to do with policy order reserves or CTR. What it means is it's an explicit margin that we include in our completion factors for purposes of producing financial statements as required by statutory accounting principles. Could you turn please to page to exhibit six page 59. And there are a lot of numbers on that exhibit. And I would like you to go through them with me so that I understand what they are and the board understands what they are. Okay. Are you there. I am. Okay. So across the top you've got five columns. Vermont Capital Region no second wave Boston Suburban Southeast New York. You see that. I do. Okay. What is why do you no second we've no second wave present. I think I understand what that means. No second wave means you're you're assuming there will be no second coronavirus wave. Correct. Yes. Okay. Then with under the other four columns where there are no numbers what what do those what what are the headings for those columns denominator. Sure. So these have to do with our various scenarios as to the severity of a second wave. So as you correctly pointed out we did model what happens if there is never a second wave in the in the left most column we modeled what would happen if Vermont experienced a second wave but it was exactly the same as the first wave that is to say the best experience in the country in terms of preventing infection and preventing hospitalization and death. So in order to provide a variety of scenarios we thought it would be instructive to look at what's happened in other nearby regions and see what the impact of Vermont would be if our experience within a second wave matched something that was more like some of these other areas. So I'm I'm not trying to make any predictions that Vermont is going to suddenly look like suburban southeastern New York. But for purposes of understanding what a scenario like that looks like we did model it and we did summarize those results within this page. Mr. Schultz have you ever sold a house? I have. Okay and when you try to figure out or when the real estate person tries to figure out how much to ask for your house they look at comparables right? They do. Okay could you tell me why you thought why you think apparently that Boston and what you call southeast suburban southeast New York which I assume is a euphemism for metropolitan New York can you tell me why you use those as comparables rather than Maine or New Hampshire or Wyoming or some other sparsely populated state? I'm going to interject to the form of the question you embedded an assumption about what the witness thinks or doesn't think and it contains some argument but if you're able to follow the question you can answer. Thanks Mr. Denafria. So first I'll just say suburban southeastern New York is not a euphemism from New York City. We used white planes as it happens. Infection rates were very similar in most areas in New Jersey as well. I don't think that's what's going to happen in Vermont. To repeat my testimony we modeled a number of different scenarios that range from the very best experience in the entire country to one of the worst experiences in the entire country. We did not model an experience that would be something that was like Italy experienced or some scenario that is something that hasn't been experienced by anybody anywhere. We looked to nearby areas for the purpose of informing us what happens if Vermont's experience in the first wave is not as good. I'm sorry if Vermont's experience in the second wave is not as good as it was in the first wave where we were as many witnesses have stated and some counsel as well we had the best experience in the country in the first wave. If you don't derive value from those Boston or suburban southeastern New York columns then by all means feel free to ignore them. That's why we included the Vermont column. That's why we included the no second wave column. Okay let's go let's go through these numbers. I see the 567 RBC I get what that is that that's the RBC Blue Cross's RBC ratio as of the end of the year last 2019 correct? Yes. Okay and then impact of changes in insured volume of a plus 75 percent. What does that mean? Simply put our ensured membership declined from 2019 to 2020 because of that the denominator of the RBC calculation will also decline which means that for a given level of surplus we actually have a higher RBC not by virtue of having increased that surplus but by virtue of the denominator being lower. Okay so the fewer insured you have all other all else equal the fewer insured you have the lower RBC can be. Correct well I'm sorry the fewer insureds we have the higher RBC will be for a given level of surplus. Okay I'll accept it that way. Just very briefly I know you talked about this a little bit and I don't want to want to prolong this but why is Blue Cross lost so much business? We attribute it to the pricing differential that exists between us and MVP. That's a pricing differential that's existed for quite a long time. That differential won't get any worse based on this year's filing but neither will it get better and we've seen membership losses over time primarily for that reason. Did you ever think that maybe if you asked for a little less of a rate increase you'd have more members and that that would be better for the company overall? Well I testified to this earlier as well. The membership changes do not actually have that much of an impact on the 2021 rates. We can see that because we're not asking for a bigger increase than MVP. We can see that through our analysis as well. I also testified that in as much as rates are underfunded and that's what I take your question to mean. If we were to intentionally ask for premiums that were below actually sound levels what that would do is reduce our surplus and make it less possible for us to invest in new programming like the Civica RX initiative that can actually bend the cost curve and lower cost for Vermonters. What we have to do here in other words is not present some sort of nominally lower rates that are going to deplete our surplus and compromise our ability to implement programming that will in fact bend the cost curve. What we need to do is to have the ability to invest in that programming so that we can bend the cost curve both through participating in Vermont state initiatives and through implementing our own programming. Okay then the next number is projected impact of 2020 operating results. You say that that reduces RBC by 17 percent? Yes that's right. It's important to take that in conjunction with the next number which is a plus 16 percent for investment results. Our as we talked about our historical financial performance our operating results in the absence of investment income have tended to be zero or negative over the last several years we expect that to continue based upon rates that were approved versus rates that were requested and we expect further that the investment income will offset the operating losses. Okay so let me ask you about each of those individually because neither of them seem to make sense to me I may be missing something but when you say projected impact the 2020 operating results is a loss of 17 points. What that means isn't it is that you are losing money on your 2020 business correct? That means that we're not making we're going to make less we expect to make less than the one and a half percent CTR that is required to maintain a constant level of RBC. Okay and so is that negative 17 net of how much you all save because of minimal coronavirus costs or is that just based let's strike that let me ask it again can you agree don't you that Blue Cross will be paying out in 2020 less than Blue Cross projected in 2019 it would be paying out in 2020? Yes I do. Okay if that's the case if you're paying out less than you for 2020 than you projected in 2019 it would be paying out in 2020 how can the impact to operating results be negative rather than positive? Because this is the impact for the baseline scenario before we consider COVID impacts the COVID impact you're talking about can be found in that okay we don't have these rows labeled but it's it's farther down the page just below the second subtotal. I get you thank you for that description. Then conversely when you say that the projected impact of 2020 results is a plus 16 percent not to harp on this but how can it possibly be a plus 16 percent when you guys lost 40 million bucks? So two reasons for that one is this this is not the pension investment results that flows through an entirely different accounting mechanism that I'm sure Ms. Green will be more than happy to elaborate upon this has to do with the investments we make relative to the premium dollars that we we take in relative to the cash flow of that those premiums ends those the claim payments out so this is not pension investments but other investments that we make as we maintain a certain level of of assets. The pension money okay so you include the pension money is on this it just comes we'll find out about it later on down in the in this exhibit yes okay um then uh investment in Vermont blue advantage that's a negative 20 percent you see that yes I do okay and what's blue advantage? Vermont blue advantage is a is a brand new company that's going to begin offering Medicare Advantage plans in Vermont in 2020 okay I'm sorry in 2021 I'm going to start and Medicare Advantage plans are not for people in the individual and small group market correct correct okay and so why should people in the individual and small group market be paying for blue cross to make an investment in a company that is not in the individual and small group market? That's an interesting question we you know blue cross is looks to provide quality products to all Vermonters um there's been a lot of market demand for us to get into this space and it's important for us as a going to concern to be able to invest in the types of new products that expand access to quality care for all Vermonters okay and then the negative six percent on the next line that's in a what what is that for what's the new company that that goes to that's that's for Civica Rx which Dr. McIntosh testified to um Civica Rx is a is an innovative solution that's going to bring lower cost generics to the state and make them available to our policy holders so that that's an investment again it's a really good example of an upfront investment that we need to be able to make in order to bring greater affordability a few years down the road in this case starting in 2022 okay and that's something that would benefit individual and small group policy holders correct yes it will um so you know that you know out all those and you got a baseline uh RBC as of December 31st 2019 of 657 right uh yes that's right okay then there are more adjustments right the equity market losses of a negative of a negative 14 percent again that doesn't include the 40 million bucks what is that uh so again that relates to those investment results that we talked about earlier that's our that's our typical cash flow separate from the pension funding okay uh and it is uh it is a 14 percent loss uh equity market loss typical for blue cross uh you'll have to ask Ruth Green that she's our treasurer she'll know that answer very good um then there's a plus 42 percent for the acceleration of the AMT credits and I believe I understand that the AMT credits were supposed to be spread out between 2019 and 2022 but you guys are getting it all in 2020 correct that's my understanding then is that is that about 40 million bucks total oh i'm sorry that's that question does the total to the total AMT credits uh amount to about 40 million dollars uh that sounds about right to me yes okay I see the two percent risk adjustment true up I won't harp on that the 46 percent that is for the uh the risk harder litigation based on the supreme court's decision a few months ago correct yes okay uh all right and then and then you have this negative one 180 based on the 40 million dollars which I've said enough about but um that that's what that's what produces the 553 right um yes that's right it's part of the calculation sorry the difference between the 657 and the 553 is because of the various adjustments between the 657 and the 553 correct right okay and then so if you if you disregarded the 180 180 percent uh hit to rvc because of the 40 million dollar investment loss then what would Blue Cross's rvc ratio be I'm going to object just to a to a word choice um Mr. Angov said investment loss and I just want to be clear I believe he's asking about the pension loss just to keep the record clear yes I stand correctly that's what I mean if you if you disregard the 40 million dollars in pension in the uh if you disregard the 40 million dollar investment with respect to the pension plan uh and thus disregard the 180 drop in rvc what would Blue Cross's rvc ratio be uh in 2020 before COVID impacts on operations uh doing a little quick math it looks like 733 percent okay and then with the um the numbers right below the 553 number you've got there are different numbers obviously for the different uh the different scenarios that you assumed um so that so that means if we just look at that those five numbers um those five numbers are the estimate of the impact to rvc based on COVID related claims and deferred care in 2020 correct specific to 2020 yes that's right okay so there's a positive 60 percent impact for no second wave is that right yes okay but only a positive 33 percent impact for suburban southeast new york yes and a 98 percent positive impact for Vermont yes okay um all right uh and thank you for your patience I know this isn't riveting but I want to make sure I understand all this um the next set of adjustments are all COVID related adjustments is that correct the the the the adjustments before you get to the estimated rvc as of December 31st 2020 yes okay and how did you what what methodology did you follow in determining those those impacts so it kind of varies by item um in terms of uncollectible premiums I can give you a very brief overview but um uh miss green is the person responsible for this estimate uh so we know that we have extended grace periods quite significantly uh during the emergency um we expect that a lot of those premiums will in fact never be paid um and so we we have a 21 point impact to rvc that's estimated here uh that canceled the next item is a six point impact due to the canceled recruitment of blueprint over payments um that one kind of is what it says it is uh we were uh going to recoup those over payments from providers but in light of the the crisis that's ongoing we decided to forgive um that recruitment um if I can just try to shortcut this a little bit on these these are estimates or projections right there's no formula that you use to determine these numbers there's no formula these are these are all our best estimates of what the impact uh is or is going to be based on actuarial judgment uh in in many cases based on actuarial judgment in some cases based on the blueprint number for example is reality that's an actual number uh the pharmacy number uh as another example is a projection based upon the six months of pharmacy experience that we have to date so we we have some pretty good line of sight into how that pharmacy experience is emerging so I would consider that and a number of these other items pretty solid projections okay um can you just go down to the last line before the footnote under key assumptions you see there are two key assumptions yes okay um and the second one is no significant no significant loss of membership due to economic downturn do you think that's a reasonable assumption I do we've we've seen some small membership losses uh to date but we have not seen uh what I would term a significant loss of membership at this point okay and my final question for this exhibit is you see just the you see in the line right above key assumptions it says RBC as of May 31st 2020 and then 695 you see that I do okay does that 695 include the 180 drop because of the 40 million loss or excluding uh again I'll defer that question to to miss green who will be able to and I'm sure has the answer to that I don't want to say the wrong thing so it will wait for her to give us the right answer very good um you you're familiar with uh Oliver Wyman's conclusion that your projections here are somewhat conservative right I am okay and you know that they say that based on their analysis that the net effect of the the impact of the coronavirus should be between 21 and 105 points positive that is RBC should increase by somewhere between 21 and 105 points correct I have seen that yes okay and you disagree with that completely I believe mr Schultz and mr chair and members of the board you'll be pleased to hear that's all I have thank you mr Schultz thank you mr Angle all right so we're gonna move on to board questions um start with number lunge thank you okay uh hold on just one second hi paul I hope you're doing well hi robin I am thank you you too start with asking you about the Oliver Wyman um estimate that we were just talking about so you had testified earlier that the second version of the modeling in exhibit 17 takes uh out the conservatism am I remembering that correctly it takes out any element of conservatism that we could find um yes okay so didn't Oliver Wyman indicate that part of the conservatism was related to the deferred care assumptions they did and um your testimony today is that the 56 percent chart that's an exhibit six is the correct chart is that right so that chart is correct in terms of the returning care by line of service the 51.7 percent that's included on the chart in I believe it's exhibit 17 that 51.7 percent is the new overall assumption okay so you you the modification you made was to drop that from 56 to 51 percent it is um it's really a function of math rather than a modification um you know as as we included the June data each of those 33 service categories had a different result in terms of the amount of deferred care so when we did the when we did the math on the new data we come up with 51.7 percent rather than 56.1 percent okay thank you I think you've heard my questions to Kate about the cost containment programs is are you the right person to ask about that or should I direct those to Andrew I I hope I can answer some of them so let's let's give it a shot okay great so um in the actuarial mem memorandum which is exhibit one page 37 there is a discussion about cost containment programs that were delayed due to covid which included programs that would reduce inpatient readmissions and reduce db admissions um what I was hoping to understand was a little bit more in terms of the rationale for not resuming those programs at some point in 2020 that's it's a good question I'm not in charge of those programs so I'm not making those decisions so hopefully Mr Garland may be able to give us some some insight there great thank you um I'm going to ask him about the home infusion program too unless you can tell me the difference between uh the program that was discontinued and how that's substantively different than a reduction in prior Roth yeah so the my understanding of the program that was discontinued is that this was um some uh kind of positive outreach to try to encourage members to use more ho infusion rather than traveling to the hospital um so it's really that outreach that's been suspended to try to move those the site of that care from hospital to home the prior authorization program is is something that's completely separate from that right but wouldn't you expect the same result that if there's no prior authorization more people would get it um keep question potentially I I've not studied that data myself so I uh I you know I'd want to do so before uh saying something conclusive about that okay thank you um sorry I'm taking notes which which requires me to flip back and forth in my notebook so no problem moment um and do you have any utilization statistics on the change in uh home infusion over the course of COVID I don't know okay is that something that you can get us or do you think Andrew would have that um I doubt Andrew has that at his fingertips as well uh so that's that's something that I can follow up with thank you okay um so you uh testified about um that care was already returning to the hospital can you give us more specifics about what kind of utilization you're seeing um so overall we're seeing uh our estimate of June utilization is about 5 percent above what we would expect based on historical norms um and that I don't have all the numbers uh at my fingertips by service category but we've we definitely see some serve some surgery service categories running at way over 100 percent there are some surgical categories that have not returned yet to 100 uh to my recollection things like heart surgeries and lung surgeries are still pretty low I'm I'm not a practitioner but I'm I'm guessing that's because the hospitals may still be grappling with how to safely do those surgeries in a COVID environment but for a number of other set service categories specifically related to surgeries we're way above 100 percent um mental health is also pretty escalated I don't think any of us will be surprised by that given everything that's going on um and I while I've looked at kind of that full distribution by all 33 categories those are kind of the ones that I'm remembering off the top of my head um so you also talked about how the change in membership did not create a change in the 2021 rate is that your testimony for the 2020 rates for the 2020 rates we did in fact uh have a submit a higher increase than mvp so using the same comparison uh you might be tempted to conclude that that that the membership losses were driving the increase um I my conclusion is a little different from that I know that mvp in 2020 I'm not here to talk about mvp's filings I'm not the expert in them but I can say that mvp in 2020 submitted a utilization trend of zero I know that was ordered to be increased as part of the process last year uh so my professional actuarial opinion is that mvp included a utilization trend in last year's filing that was much too low um I personally would not use a one percent utilization trend for this year either uh which is what they filed for this year's filing um so if if I were mvp's actuary which I'm not I I don't think a one percent uh trend is is reasonable so I think their rate may be too low this year as well so uh but the membership has impacted the morbidity of your population has it not it has impacted the morbidity yes that's true and we have adjusted for that in in doing our utilization trend projections this year or in only in prior years I'm sorry in this year or only in prior years uh in this year and in prior years we have consistently adjusted for morbidity changes in the population uh when developing our utilization trend um in exhibit one page 163 which is the PPR chart yes they're myself here um where it says approved contribution to reserve these numbers don't reflect what the board approved isn't that right that is correct these numbers you have adjusted based on uh other changes that the board made in its order assuming that those would fall to the CTR do I understand that right yes you did um in terms of the investments in blue advantage which which other markets are contributing to the blue advantage program that that's a hard question to answer I mean all of um the entirety of our book of business contributes toward our surplus and therefore toward our overall RBC so yes that includes self-insured plans so it's it's not it's not as if we're you know we're not doing something as direct as saying okay we need to increase this rate by five percent for or half a point or whatever to pay for blue advantage right it's our surpluses are aggregated um the the result of our aggregated operations over the entirety of the time that Blue Cross has been in business so when we decide to spend that surplus whether that's on a new making a new product available um so that we can improve access and quality for a segment of Vermonters that we weren't able to serve before or if that's for new programming it's going to make uh the cost of care more affordable for all Vermonters that comes from that entire amalgamation of 40 plus years of business that we've done so yes it's it's all in there if you want to think about who has contributed toward that it's self-funded lines it's these insured lines we're talking about today it's large group insured it's our Medicare supplement business it's our investment performance over time it's kind of all of those things intermingled okay thank you um in the administrative cost or cost to insurance estimates uh did you include any assumptions related to the federal requirement to provide a separate bill for abortion services um we did not do anything explicit there now okay so there's no increase in your administrative cost relating to that requirement that's correct there is no increase yep that's good because it's not happening so we wouldn't want to charge for it um okay so I have some questions related to unit costs and items that are in the confidential portions of the exhibit it might it makes sense Mike to fold those until all everybody else is gone because I might not be the only one that yes that makes sense thank you I meant our mic oh sorry that's okay which exhibit Robin uh well I have um on page exhibit 131 there is a sentence that is confidential related to e-schedules yeah I think Mike Mike do you anticipate an executive session for Andrew Garland's testimony I believe so if if Bridget can chime in Bridget has been working most directly with Andrew you'd get a better answer from from Bridget on that yes we do anticipate an executive session for Mr Garland okay why don't we do it all yeah that makes sense because my questions may be for Andrew I'm not sure so that would that would be more efficient I believe um okay then I'm good thank you thank you Robin okay Maureen hi Paul hi Maureen a couple questions um in the opening arguments and something that you've also touched upon which is that your rate submitted and then lower than the competitors this year so 6.3 versus 7.3 and one of the things I guess I want to look at how do we think about the risk transfer adjustment because prior to the risk transfer adjustment the blue cross rate increase would be 7.7 percent and the MVP rate increase would be 6.1 so basically you have a higher rate request I think on the underlying rate than does MVP but because there's assumption that based on the risk transfer I guess you'll have unhealthier people and you'll pay more which is included in your rates you get money back um am I thinking about that wrong I just want to make sure you know because I it was kind of a new approach for you guys to be I think looking at the competitor and what they're charging and I tend to look at it prior to risk transfer um as what the underlying rates are and then the risk transfer is a separate adjustment and just wanted to get your point of view on that yeah I think that's an appropriate way to view it but that while the risk transfer is a separate adjustment it's very closely related to kind of that underlying amount that you talked about as well in other words the reason that our increase without risk adjustment is higher than MVPs is because we have we have all the folks who have the higher healthcare needs so really the risk adjustment program is working exactly as intended in as much as you know one carrier has much more of the unhealthy your risk and the other carrier has most of the healthy risk the risk adjustment transfer is supposed to net that out so I you know I I look at things myself as well before then the risk adjustment transfer and I often see that we're having losses because claims are higher than I projected but then the risk adjustment transfer comes in higher than expected as well and kind of washes that out that's that's the way those two things are supposed to work and it appears to be working that way in Vermont just to that how then should that relate to premiums charge so if if in fact a risk transfer is kind of helping to set the market straight right wouldn't wouldn't in theory and in perfect world wouldn't then you know the risk transfer make the rates comparable on similar plans so gold to gold bronze to bronze etc you know knowing there's a different mix of people and I'm not trying to say you know to me I thought that's part of what it's supposed to do and so why doesn't that happen yeah that's that's a really good question and I've been spending a lot of time over the past couple years trying to answer that question for Blue Cross so what what we're seeing is that the morbidity differences between Blue Cross and MVP net of risk transfer are not really changing over time because that that net increase that we're asking for is is very similar to what MVP is asking for and as I responded to Robin Lunge I think there are some other reasons why MVP's rate requests have been a little bit lower than ours in past years specific to the utilization trend assumption so when I think about risk adjustment I while the situation isn't really worsening I do think there's an opportunity there and that if we were able to optimize risk coding in other words if if doctors in Vermont were coding for every condition that a member has but no conditions that a member doesn't have so if risk coding were perfect I do believe there's a there's a pretty significant opportunity to increase that risk adjustment by as much as 10 million dollars in terms of the transfer and if we were able to to make that happen that would bring our rates very much more in line with MVP's so I am working with some of my teammates and others within the organization on just that to try to make that happen because we believe that risk adjustment has not been really operating at 100 maximum efficiency and that there's some opportunity there okay because I mean it would be obviously good if our Vermont based insurer could be you know competitive with the you know other insurers to to keep that viable when when you talk about admin costs and and you actually quoted you know something that was in the reports you know 90 percent lower than you know in the L&E report again you know kind of all well and good but when we look at in the state right and amongst the two filings that we have you know Blue Cross is is over 12 higher on a pm pm basis than what MVP is for an admin right and you know again so we're kind of comparing you know within our market right and there's different dynamics that go on there and I know they're coming out of New York etc but you know how should we look at that because it's pretty significant to have you know such a high increase on a pm pm base high comparable on a pm pm basis so I first I'd say probably percent on a precedent premium basis is the more apt comparison to make a lot of administrative expenses are variable and they are variable with respect to the number of claims if if members are not using an awful lot of care they're not calling the call center as much we're not processing as many claims etc etc so there's there's a whole line of sort of variable expenses that do fluctuate based upon the amount of care that's consumed so for that reason I I personally would steer clear of pm pm comparisons and look at it more in in relative to percent of premium beyond that I'm I'm not sure that I can give you any like key insights into into MVP's administrative structure or how or why it might be any different from Blue Cross's administrative structure okay I'm gonna look at two charts one the exhibit one page 163 that we've talked a lot about which had the 12.6 million actual operating losses in the past six years and I think you were adjusting it slightly for what you now know maybe a little bit different and so I think you were increasing it by maybe you know 2.8 million so was that about right so you're gonna be about 15 million and and if I look at actually the last three years including that additional change it's it's been a net change of about I think a negative three million dollars yeah I think that might be a little bit much again I'm doing math on the fly which I'm I'm not supposed to be doing but I think the risk adjustment transfer true up was a little bit less than a million dollars if I'm recalling correctly okay so that that 12.6 probably becomes something in the in the range of 13.5 13.6 somewhere around there um but yeah apart from that clarification I think your understanding of of what we show in the chart is accurate okay and then if we go to the exhibit six page 59 you know looking at at the RBC and what's gone on there um would it be fair to say I guess I'll ask the question you know on average um you know year over year on average knowing there's ups and downs but do you project investment gains do you expect investment gains on average okay um and the reason I point that out is because as we look at the number that you had for the for the last six years and and even if we make it the last three years but for the last six years I think it had a total of about a 70 point impact on RBC is that correct in terms of the operating losses or yeah so 12 million dollars in operating losses has had about a about a 60 percent 60 points and we would expect that we would have investment gains so I just point that out because we hear a lot about what the Green Mountain Care Board has done to the rates and you know here we have a six-year trend we have a 12 million dollar loss maybe it's a 13 million dollar loss um over six years and we did expect as a company would expect there would be investment gains that would offset that so overall I don't think that's that's too bad I mean I know there's puts and takes but well I do want to point out um I think it's important to recognize that the one and a half percent CTR that we file assumes that we will have investment gains so if we did not have investment gains our required long-term CTR would not be one and a half percent but something quite a bit higher than that I can't sit here and do the math right now but for sake of argument or sake of illustration I'll just say that might be three percent but because of investment gains we're able to bring that back down to one and a half percent so I do think what we were showing in the earlier exhibit is a fair comparison because it shows what's happened from operations we do expect some investment gains but those investment gains are what allow us to file a CTR that's as low as one and a half percent instead of filing something much higher than that and I know last year we talked a lot about the you know amt tax and what was going to happen or whether it was admitted or not admitted and all this went back and forth but you know at this point when we look as of May we're reporting 695 for an RBC when you look to the end of the year prior to the pension change it would be 733 and prior to any other COVID adjustments which would put us near the top range of the 590 to 745 and you know I'm not going to belabor the point at this point but that you know the 180 basic point hit that's going to be expected for the pension and from what I've been reading it doesn't occur till 1231 so it's not in the May numbers you know that 180 first contrasted to what we just said was a six year loss or six year change for for this plan with the 60 basis points or 70 basis points so just to kind of show the magnitude of what this 180 is going to potentially do to the to the RBC is huge and I think the you know prior questioning you know is very relevant whether we say it impacts or not it impacts it's it's when this hits at the end of the year if it's still 180 it will be 180 basis points reduction which will bring us now to the lower end of the range versus being it quite healthy in the upper end of the range so you know I'm sure there'll be some other questioning on this I you know I know it wasn't what was expected to happen with this pension and and there's going to be lawsuits and everything else going from this but you know it's a significant burden and it's three times the size of six years of impact for what what has been for the you know for this book of business so I don't know the answer to it I don't know what we do but it certainly you know it certainly plays in to what's happening and I'm sure it was a big surprise to everybody and I'll just leave it at that for now but but I do think it's pretty critical as we talk about the and I believe this is non-confidential but you know the hospital rates and what's what has been approved and then what rolled through this filing specifically to exhibit 21 which was rates that have been submitted potentially bought by EVM I just want to get an understanding on what's included in the rates right now have we included just the prior hospital rate increases or have we overlaid I believe we have overlaid I believe you've overlaid this increase in there and can you talk to that we have not included this increase this is something that you know the the letter that's included in the exhibit came to our attention well after the filing date so but what we included in the filing was simply an assumption that the commercial rate increases that were approved in 2020 were approved in 2019 sorry for actuaries to keep our years straight sometimes sorry about that that the commercial rate increases approved in 2019 would match the commercial rate increases that you're about to approve in 2020 okay and we talk a lot about the rate increases and comparing so when we're going to get new numbers in and the rates you know inevitably won't be the exact same and we you know look to you know you always look to adjust that and put that into your plans how do you look at utilization and what the hospitals put in their budgets for utilization which I think is equally as important for all their utilization assumptions and I just want to get a handle on you know how do you guys look at at that as well or do can you I mean not as their utilization is off all all types and you know like but still there are major assumptions that you have and major stuff that they have yes so I do think hospitals utilization assumptions are extremely important in terms of assessing their commercial rate uh asks um that you know especially given that we've already seen a huge deferral of care and we expect a lot of that care to return I don't think it would be appropriate to include a zero percent utilization in a hospital budget beyond that um and you kind of started touching on it uh marine are I believe that our utilization trend is the most accurate utilization trend specific to our business hospitals have to consider Medicaid they have to consider Medicare they have a whole host of patients that are well beyond just in our insured patients they have to consider you know state employees Vermont teachers that are that are part of self-funded programs um so you know it is it is not exactly an apples to apples comparison so I do think it's an important assumption and I'm glad that the board is will be looking at that for hospital budgets as well but I also think that our assumption is is the best assumption that we can use specific to the blue cross uh utilization for blue cross members in these lines of business okay and um one last question on cost savings and cost containment um you know there there have been things in prior filings there are things in this filings and there will be things obviously in future filings and just really want to push on how much can we get from the cost savings and cost containment I know I believe it was last year I think in some of the testimony you know when we have put in one percent for affordability it was like well we we you know if you told me in advance that I needed that I could get it but you can't tell me in the current year something like that was stated right so so how do we get um you know maybe there's already some in for 21 there is but how do we get that bigger in the future filings you know how can we say now I want that to be two or three percent you know next year I mean what are we working on what can we get and how you know how can we push that harder yeah I think having that guidance early from the Green Mountain Care Board as to what your expectation is um will will help us uh as we strive to implement this that some of that programming um it it's not always an easy thing to implement some of those savings programs because we are often making trade-offs while we're enhancing affordability we might do that um by restricting in some way access to care whether that's directing you know if we think about some of the uh cost differentials and so forth that exists within the hospitals one thing we could do potentially is direct members who need a colonoscopy for example to one facility over another um that could generate some savings some of some enhanced affordability but at the cost of access you can no longer drive this down the street and go to your local hospital to have this service you might have to drive 45 minutes down the road an hour down the road something like that um other programming that we're implementing has an impact on providers and we often get an awful lot of pushback um from providers when it comes to implementing that kind of programming um so yeah there there are some things we can do uh in this year's rates we've included as i testified about five million dollars worth of savings through blue cross uh programs that five million dollars is is going to be uh something like maybe 1.7 percent or so uh of total premium so that's that's a pretty good number we've already included that and if you tell us now that we expect you to include uh some number one percent has been your affordability cut in the past two percent whatever that number may be um i think that would be helpful for us as we try to take strides to actually achieve those savings and incorporate them into the premiums what we can't do is as you as you alluded to we can't react immediately so if you tell us now we need you to achieve an extra one percent in savings through this programming by next year there's just not enough time to develop and implement a program by the start of 2021 to achieve that savings in 2021 if you told us right now we expect you to achieve an additional point of savings in 2022 then that gives us enough runway to actually figure out how to do it if you will and you could exceed your savings that you have this year i think you had exceeded in some of the commentary you exceeded how much you thought you would get so i guess are you are you conservative in what you roll in there for these estimates it's a good question we we try not to be uh sometimes it's it's difficult to to um project exactly how much savings we're going to see uh some of the programming that we had in in the last few filings um isn't going to isn't going to lead to the type of savings we had estimated um for large part because we've had to suspend a lot of those activities due to the pandemic so sometimes things come to fruition sometimes they exceed what we thought they were the lab benefit manager is a good uh is a good example of one that's actually worth more than what we thought so while we had something in our rates last year for it we actually achieved something greater and that delta flows into this year's rates so that you know the savings that we're including as part of that five million dollars in this year's rates are on top of the savings that we already assumed that we were going to achieve in last year's rates it's all cumulative as we go along that's all for my questions i'm sure i have some others but i'm sure the other board members will address those as well so thank you thank you okay next we'll go to board member pelham hi paul how are you morning tom and quite well how are you you holding up okay i am holding up okay yes thank you so i i want to start with just a little bit of housekeeping um just to be sure i want to go back to uh exhibit 23 okay and that was the uh kaiser chart yes and just um so at the top of your version of it um you where you've added blue cross blue shields profile it says individuals slash merged market medical loss ratios and then when you click on the link it says average individual mark market medical loss ratios so i'm just wondering is this an apples to apples comparison uh did you put in insert the merged market to make it clear that in vermont it's a merged market but are these numbers nationally just for the individual market they are just for the individual market and i i do think that's the best basis of comparison relative to our merged market uh when cms issues various reporting about how the markets are performing whether that's related to mlr rebates or anything else um the vermont merged market is included with all the individual market reporting so i i do you know it's as as you point out it's not a precise comparison um but i think it's the best comparison that we can make right i mean especially it's hard to find national data so i mean uh just found just found that chart and sent it around to us uh you know months ago you know and i kind of um have had it to the back of my mind um hang on a minute did i lose you i'm still here okay so um i just want to start again by um just you know for me kind of finding a path between kind of the look back trending actuarial approach and the kind of the look forward um uh all pair model uh approach because there there is attention there and um you know i've kind of aligned myself just in terms of my my board work with the three and a half percent target because i know where that comes from that comes from you know jeff car and tom kevets analysis of the gross state product from uh 2001 to 2016 and that's where that three and a half percent came from so it's it's grounded um in the vermont economy obviously things change the economy's you know taken a bit of a wear and tear in the last few months but it's it's a number and so the first year in in the um that we have the apm total cost of care for 2018 we're at 4.1 percent so we're still within those guard rails around the three and a half percent but i worry that 19 20 21 especially reading letters like Todd Keating's you know that um you know we are um you know we we are not going to get where we want to go so um so um but i i do want to say that um in terms of the wyman data you know the that those numbers tie out um uh precisely in terms of um the net gains to what's in your audit financial statements and what's in the um uh um supplemental health care exhibit so i feel comfortable in that and they they they do say and i um that they do if you kind of add them up um um over from the 2015 to 2019 period pick whatever venue you want you end up with a a total gain of uh 16.8 million dollars over those five years um with uh um with losses that's seen that i'm a current net income accruing in three years and losses in two years so i raised that just because i run into people and say hey that's these insurance companies they've got all the money just whack you know and it's just popular out on the street there you know and i kind of want to agree with them in some ways just you know emotionally but that's it's not there um i don't think um but i do think that you can find savings no budget is perfect marine says that all the time it's uh it's uh um it it changes from the minute it's been approved and you know i found that in my experiences always two or three percent you can find if you push a little bit and there's some screaming but um uh it's it's there so um so i want to go to um the uh um the quote and i think it's not in exit i'm not going to go switch my binder i i think i just hope my notes are good here it's in an exhibit of one page 31 where you say observations of recent contracting and provider budgetary changes are the main source of unit cost trend and further you say 53 percent of the total medical claims occurred in remodeled facilities and providers impacted by the hospital budget review process of the green mountain care board and you know i i can look at data that we have um in terms of hospital budgets and stuff and kind of get and even commercial insurance you know uh you know what what that is in terms of revenues to hospitals but i'm just wondering if you and if you're not the right person that's fine if you can you dig a little deeper on that um uh on on that 53 percent and kind of uh how the entities that comprise that 50 percent how their input to it is weighted relative to one another i mean is um is there a waiting system that goes on when you're kind of looking at the trends of those entities yes so it's and then the the weights that we use are the the claims that our members incur at those entities um so as you might imagine university of vermont health network is the is the strong majority uh you know by far the biggest entity um within there i don't i don't know that they're a majority of the 53 percent but i could get that data and then share that with you and your fellow board members so that i can tell you in terms of uh npr and in terms of overall commercial revenue um they are more than a majority we have those numbers here the uh you know the number um for 2019 was total commercial revenue hospitals was 1.395 billion dollars and the network was 54 percent of it um so you know it's it's it's but it's just something to to ponder um so my next question is that that the trends that you look back on are trends that blue cross blue shield has had a hand in negotiating i mean earlier you said you know that we look back into our database and you obviously have a database about claims um and that's part of your trend but it's it's not that it's entirely the the trends that you look at are not entirely kind of a free market independent uh process so you you you are part of the process of negotiating those trends um that that's a yes or no answer i guess uh yes i think uh andrew garland will testify at length about that process okay well i'll just ask the question now but i'll ask it to him later is is just um you know the there's another quote and i'll i'll say from last year where they basically say that you know that with some providers you kind of run up against a brick wall and it's either give them what the green mountain care board approved or they won't they might withdraw from your network that was the testimony you know uh last year and so i'm just wondering um you know it you know about that process um uh and trying to kind of get more to the all all-pair model result um is that and i'll ask ask andrew this but it seems to me that kind of the message is green mountain care board you do the heavy lifting here you set the constraint uh and and uh you know constraint so um anything over that constraint uh is uh uh it's going to be a kind of a a negotiating item between the insurer and the provider if i'm a board member palom i apologize i just want to remind mr schultz that the question veers towards um confidential areas of testimony about provider negotiations and i would just caution mr schultz since we're in open session not to reveal any such information and there there will likely be a executive session yeah where we can go into that more depth later thank you i appreciate that that's why reference data that you know comes out of our system you know in terms of the uh you know commercial payments in 2019 um so um and this might not be a question for you but it in the 2019 supplemental health care exhibit it indicates a 1.63 million dollar expenditure for cost containment what do you know what that is what that goes to directly i i do not uh miss green will most likely be able to answer that question for us okay provider negotiations essential benefits we covered cost shift thank you i was going to ask that question and your attorney beat me to it but i wasn't going to ask i wasn't i wasn't going to ask the question that you did answer on um the difference between the qhp operating loss and the supplemental health care underwriting i wasn't going to ask that one but i got the answer anyhow administrative charges um provider network uh just one question on the loss ratio um i mean you can go back through history and look at loss ratios i think for some of your portfolio near the beginning um that's not a sticky here somewhere but you were you were down in the you know for for it might have been individual claims there might have been a small group in like the high 80s um going back four or five years and i'm just wondering if if there were a um a more um aggressive approach toward provider budget increases um and and therefore claims costs could be driven down a little bit you know that could fall to the benefit of rate payers it's it's uh because you know and saying kind of at the same ratio that that could fall to the benefit rate payers yes i i agree in as much as uh hospital um reimbursements are lower that definitely benefits rate payers and the same is true you you learn alluded a little bit earlier to you know if we're able to trim budgets by two or three percent um with respect to the premium rate we need to understand that two three percent is means we're paying providers two to three percent less right that's you know blue crosses admin portion of the premium is very small so we can't find two to three percent a total premium there we're talking about paying providers less that's right i mean that's why i raised the the wyman data because i i think there might be something there and admin things of that sort but it's not where you're going to find the money to really substantially impact uh um premium rates say it's it's it's in the as the money comes out of rate payers pockets goes through you guys and out to the real world you know that that's where this option is and so i i just was trying in my simplistic way to get a sense of what we're talking about here and so this is my simple math and you can correct me if i'm wrong is that if you look at uh what was filed for 2021 it was a 311 million dollar increase or a 311 million dollar premium amount um which is uh 18.5 million above the 292 million dollar number uh projected in those uh um um small group an individual for um for you for this year so it's an 18 million dollar delta um and if you divide that by the original 6.34 percent increase that's 2.93 2 2 million uh 2.93 million dollars per point and so you're now at 5.5 percent um if uh if the target my target were 3.5 percent you could say to me go find it mr palam um but that would but that would be uh 2 uh million i mean two times the 2.93 million or 5.8 million dollars so that's what that to get down to a 3.5 percent level we're talking about 5.8 million dollars in the system um that that might be impacted on uh providers out there in the world you know mostly the hospitals is that a rational logic so it is um a couple of good stuff there that uh there are a couple key differences between the all-payer model and what we're putting in our rates uh most notably is that the all-payer model target uh doesn't include pharmacy so our our rates you know as i testified 3.7 percent of that increase is due to specialty pharmacy yeah so if if we you know now some of specialty pharmacy granted is takes place with as part of the medical benefit so that would be part of the 3.5 percent target um it especially is about 50 50 in terms of retail pharmacy uh versus medical benefit so if we take out half of that 3.7 we're talking about a little under 2 percent that's specifically due to specialty pharmacy retail pharmacy is also escalating well retail pharmacy is mostly escalating because of specialty pharmacy so i'll just leave it at that um kind of the other key difference is that that three and a half percent includes all payers at as the title suggests right so it's medicare it's medicaid and it's commercial payers and i've we seen as we've seen year after year after year in the hospital budget submissions there is inevitably a cost shift from medicare and medicaid to commercial players so i even if we as a state achieve to the three and a half percent um i i would be astonished and in a really good way if that three and a half percent came from three and a half percent from medicaid three and a half percent medicare and three and a half percent commercial uh what's been the experience in vermont and what i would expect to happen is something that's more like a very low number zero to something very small for medicaid again a very low number for medicare and then the commercial increase becomes the balancing item so we might be at zero one and six by way of example just using some really rough rough illustrative estimates um so i you know i i'm not sure that there's a scenario where we actually get the because of the because we include prescription drugs and because of the you know the the prevalence and cost escalation of the specialty pharmaceuticals but also because of the cost shift it's hard to foresee a situation where a commercial rate increase would be as low as three and a half because the medicare and medicaid increases are unlikely to be as high as three and a half yeah well i mean those are those are very good points and when it comes to the pharmacy specialty and i have no no good ideas i mean it just seems a world out beyond our borders you know that that that can't be um you know adjusted or manipulated but i think in terms of and i agree with you on the all-payer model the three and a half percent to some extent but keep in mind that increases in medicaid don't count during this period don't count to the total cost of care because the the agreement exempts them basically so the what drives the three and a half percent is the uh is the commercial um and and the medicare so um you know and so when i when i kind of um i had another point to make there but hopefully it will come back but when i when i kind of look at to kind of follow the money over the last five years and it and i see that the uvm medical center not the network but the uvm medical center itself over the last five years uh up through 2019 accrued 295.8 million of the operating margin of 329.2 million and uh we have other hospitals that are hanging on by their fingernails something seems possibly awry to me in as the money comes out of ray payers pockets goes through the insurance system negotiations happen with these providers and it and and the flow of the money is heavily weighted i mean 89 you can do the math on that february 26 uh um notation that was in my letter to you folks um that seems to me a place where um the board might be helpful giving well the board might be helpful in in in setting some some boundaries that aren't up in the six seven eight nine percent world um so um there was one more thought i had and oh um in terms of the cost shift and again this is this is outside your domain but you know in terms of looking at it you know um uh where might we find more medicaid money you know or where could we have found more medicaid money to maybe balance the scales a little bit because if medicaid does contribute more then the cost shift might be nullified on you guys a little bit certainly not the 16 percent or whatever it is and so as you as as you follow the big items in adiba's medicaid budget um through the third quarter of the state fiscal year 2020 they had only spent and it was adjusted downward in the legislature's budget adjustment they had only spent 63 percent of their appropriation uh and but we are three quarters of the way through the year there are tens of millions and this has been going on year after year after year as the as the economy rose and when i was finance commissioner i saw the reverse of that you know it gets pretty scary when it's going the other way but um you know but but there's opportunity there um i think um you have doug hoffer's audit of dr dinosaur where he found that people were um not paying their premiums but still getting medicaid benefits and just the small sample he used was 2.3 million dollars that's um you know and uh you know you have the fact that dr dinosaur premiums um are lower today than they were in 2004 think about that and that's because they were taken out of the legislative domain and put into um uh the um uh the the agreement agreement with the feds the waiver way of 1115 waiver agreement so there are options out here if we think beyond this process um and um but within this process you know i i think it's an important venue for us to set expectations you know that it's it's it's not just the insurers have an obligation and the board has an obligation but other players um have an obligation or we're not going to be successful you know with with the agreement that that we've we've uh you know the journey that we're on so um that's more my rant than my questions but um i i i just think it's important that that we can be here and worried about all these kind of you know in the weeds about all these these technical issues and i'm certainly glad to go there but um i'm just not quite sure what what it will get us in the long run in the big picture okay board member hams okay thank you um i guess we all are asking you the same question paul how are you doing i'll be happy for that next break and i was thinking about i think this happened to me last year but i've always said i don't teach classes before or after lunchtime because before lunchtime everybody's starving and they just want to get out and after lunchtime they have a food coma 1241 so bear with me uh i know i'm the only thing between you and lunch actually chair mullen has to go too but um thank you for for bearing with all of our questions um and as a quick thought in reference to morine's uh you made a comment to morine if you can give us a longer runway we can achieve some cost savings and so tell us by 2022 so here's your runway by 2022 we got to get these premium growth rates to you know at the the wage growth in the state of vermont so if you need that runway i'm here i am giving it to you but anyway that's an aside can you just turn to um exhibit one page 33 if you would i'm there okay perfect i want it's at the bottom chart and you're talking about um the you know since 2014 implementing new programs to combat fraud waste and abuse um it in you know those programs increased rapidly over that time period you were able to recover more claims and in 2018 you've covered you know 1.42 percent claims the migrations when your platform slowed it down in 2019 and then you talk about due to COVID-19 you've stopped those programs and it's unclear when they will start again um so my question is around that why and and i understand that you may not be the answer you may not be able to answer the why question but if you could answer the why question i'd really appreciate it because it does seem to have an impact um on you know on rates and on affordability having those you know those programs in place so how has COVID-19 stopped the fwa programs yeah so i i'm not uh particularly closely involved with that decision but my understanding is that because providers have so much on this on their plates right now responding to the pandemic that we're trying to ease the burden on them in other ways uh we suspended some prior aughts and we've also made the made the decision this has been uh fraud waste and abuse activities just to ease that burden on providers during this difficult time okay um so let me follow up a little bit with that so now we know that for example you know utilization is has increased above capacity so to the degree that we'd want to really be vigilant about fraud waste and abuse now would be the time perhaps even more so recognizing that should there be a second surge or something like that we may want to cut back even you know providers are dealing with a pandemic but given the levels of infections that we have now and the increased utilization that we're seeing seems like now would be the time to to think about reinstating those programs and i just can you if you can turn to exhibit six of page 59 i want to be able to understand this it looks like to me and this is where we're looking at rbc um it looks like to me the impact of suspension of those audit activities has a rbc reduction of 19 percent which is actually greater the projected impact of 2020 operating results of 17 percent right so i mean the the magnitude is not insignificant it's in the notes it talks about claims will be about four million dollars above projections because of the suspension so i guess what i would ask is actually if you return to the 2018 levels for 2021 what would the impact be on the premium rate change oh that's an interesting question that makes me makes me think about my actuarial work a little bit um so we we did not assume in this rate filing that that fwa would go away um we assumed that um that it would maintain at the at the pre-covid levels so we we did make some adjustments in coming up with our utilization trend to to adjust for the fact that it's kind of varied over time but we did not assume in this filing that those fwa activities would go away and would continue to be gone for 2021 my understanding is that we've we've agreed to suspend those activities as long as the emergency order is is in place um beyond that i can't really speak to the timing of when we think those activities will come back but we do expect to resume them um at the at the well my expectation is that they will have resumed by 2021 i guess would be my best way of putting that well if you turn to page 34 just the next page it says you assume that the percentage of claims recovered through these programs will remain at approximately three quarters of percent of total bad claims right so you're assuming the same level in 2021 as in 2019 which is below the 2018 level right i guess what i'm asking is if you went back to the 2018 level what would be maybe you can answer later if that's helpful or oh that's okay uh so you know we're talking about that you know the delta from 2019 to 2018 uh looks like about 0.65 percent of claims yeah premium as we know is not exactly equal to claims so there's you know we do have some other items that are in there as well um and that'll be on medical claims only so i'm i'm trying to kind of talk through the answer rather than giving you a precise answer but we're we're probably talking about something that's that's less than a half a point on premiums thank you um and i know my colleague robin asked you about the why um cost containment programs were suspended i'm not going to ask you the why i know she'll ask mr garland later but i guess i did want to ask i did want to say um again on exhibit one page 14 it talks about the claims experience for 2019 this is in the first paragraph under 1.5 um claims experience for 2019 was very slightly favorable relative to the expectation embedded within the 2020 filing driven by 1 improvement due to you know blue cross blue shields cost containment programming that exceeded expectations so we know that the programming has an impact um on claims and on you know cost containment it seems to be working at least according to that so i guess my question to you would be actuarially trying to keep the actuarial questions for you if cost containment programming was the same as it had been prior to the platform being introduced and prior to COVID-19 what would the reduction be there in premium growth rate if there there wouldn't actually be one here the 1.3 percent that we're referring to in this paragraph has to do with the lab benefit manager that dr macintosh discussed um and those savings are well the savings that took place are included in the filing and we're assuming that those savings will continue into the future as well in fact we're assuming that the lab benefit manager will be able to hold lab utilization to zero to no increase at all um as we move forward in time so that those particular savings are most definitely already in here okay so do you know i'm not asking you the why but of the programs that were suspended if they were resumed what would be the impact do you have any sense of that i i don't think there would be an impact those that programming um we'll have already manifested itself in the experience like in the claims experience we use to develop this filing so by resuming them and allowing them to continue we we would we would assume that that would you know we would assume that the impact that they had in the claims experience will continue to be the impact that they have in the future and so um again i would not make an adjustment for that um assuming we turn them back on before 2021 okay um i had similar questions to maureen about the admin costs um in terms of per member per month you know it is a stark difference per member per month and i recognize that you would prefer to look at it as a percent of premium but you know whenever we can it's nice to see an apples to apples comparison right and when we look at two competitors in the same market with in the same state with roughly the same size member population that seems like the best apples to apples comparison one could possibly make and there is a significant difference in the per member per month administrative charge and so i i i know you've already tried to answer that i'm not gonna you know ask it again but i i would just point out that it you know on a per member per month basis it's very difficult to see that huge difference and not think what is underlying that so i don't want to give you the opportunity to just comment but if you just want to say it's better to look at percent premium i will i do think because of the variable costs that are involved it makes more sense to look at the at the percent of premium okay um a second another question is i you know we've talked a lot about the COVID-19 impact and a lot of modeling and i appreciate all the modeling that's been done i know how very difficult that is so many different assumptions so many different ways at which you could tackle that obviously the impact can be positive negative depending on whether the second wave what we think about with the third procedures the cost of vaccines cost of treatments all of that but one of the things that seems to me to be uh more predictable is the fact that telemedicine is probably here to stay right and not going away and we know that there are studies that are showing their significant cost savings associated with as we have more telemedicine ed visits go down you know urgent care visits go down which are very costly and your own modeling talks about a fortune in production and utilization um related to that telemedicine in those ways so i'm wondering why not carry that forward because that doesn't necessarily depend on how many cases we have whether there's a surge what the treatment costs of COVID are that's a change in demand that's happening because provider and consumer behavior has changed so why not factor that in to your assessment of costs and utilization we did um we have a section in the in the memo and i believe we repeated it in the addendum we are assuming that er and urgent care utilization will never return to pre-covid levels that assumption is is kind of belied by emerging june experience we'll see how that continues to develop but it looks like based on what we know today about june that that er and urgent care utilization did return to pre-covid levels that's a surprising result to me but we ignored that for purposes of the modeling and we did include an ongoing reduction of about 14 percent in er and urgent care utilization and recognition of the of the increase in use of telemedicine and so forth perfect i thought you had modeled it but i didn't realize you had included it so that is great answer to my question um looking i'm looking at all of my notes as well so is there and this might be a question for Ruth but i'll ask you anyway and you can tell me if it's more of a question for Ruth are there legal limitations on how CTR might be used so you know CTR is largely meant to cover medical costs unexpected medical losses things like that but to the extent that you know if Blue Cross was shielded let's just say wanted to build a new building new office building or wanted to do something would it come out of CTR are there any limitations is there any minimum that has to be kept in CTR to cover medical losses um so it's a good question it's a complex answer and Ruth will probably be able to elaborate it but you know dfr as our solvency regulator keeps close tabs of how we're spending our surplus what we're doing with it they had for example for vermont blue advantage which we've touched on a little bit that all had to be approved by dfr before before we spent that money and took that step so i i think i'll kind of leave my answer there it's probably just a starting point and Ruth will probably be able to elaborate on that okay great my last question is actually this is more of a curiosity but i just recently read that there are a bunch of news reports that premature births have plummeted as a result of COVID-19 and they can't figure it out why but it's happening in different countries and it's it's a very very significant drop in premature births and they're trying to unpack it and figure out why so i'm just this is a curiosity question but obviously premature births are extremely expensive and i'm wondering if we're seeing that if you're seeing that is this even a topic of conversation at blue cross that is fascinating i was unaware of that um and i i'm interested to go back and look at our own data i think our birth rate in vermont is not so i might have really good data on it um because you know just one or two premature births will really throw that that percentage around when we're talking about a small population like vermont but that that's that's really interesting and i i look forward to looking at our own data to see if we can find that here too yeah okay that was a curiosity thank you i have some other questions that i think probably will you know go towards executive sessions so thank you welcome thank you okay um i think i'm probably not the only one who needs a bathroom break so why don't we take five minutes come back to the chairs questions uh potential redirect i would just say we're again despite the pre-fail testimony behind where i was hoping to be at this point in the hearing so um just be aware of that we have so wouldn't it be more if you combined your bathroom break with the lunch break it would save five minutes sure we can do that if you want to go ahead and ask questions oh i was just saying that it'd be nice just to have one break i don't have to ask my questions now if people are crossing their legs but i'll leave it to you mr hearing officer does anyone need a five-minute break nope everyone's good all right mr chair thank you good afternoon mr schultz afternoon chairman earlier this morning you testified that retail pharmacy was cutting into margin and thus into reserves but isn't it true that blue cross made several changes to make it better for for monitors facing the pandemic by i believe in some cases allowing for 180 day fills and things like that yes uh suspension of uh early refill edits those sorts of things yes that's true so wouldn't you begin to see some savings from that since they won't need to get those medications over the next few months yeah for the for the most part we're talking about 90 day fills and those those programs were implemented generally in the late march your early april time frame so if we look at data through june um we will have seen sort of the full ebb and flow of that as as scripts were filled in early april for 90 days they don't have to be filled again until july so i i do think that we um we were able to assess that fairly by looking at data uh all the way through june okay thanks um last year you testified um about uh some savings that could occur it may have been the year before time runs runs by me now um through the opening of the asc have those um estimated savings come to reality um i i honestly haven't looked at those data um so that that's something i'd be happy to follow up on okay um sometimes it's uh as jogi barrow would say it's uh deja vu all over again or maybe i feel like i'm in groundhog day but um you testified that um really a lot of the um orders that the green mountain care board has offered in the past were really just a reduction to reserves and you also made the statement and i know that one member followed up on that that um you said um if you want us to achieve savings tell us to do it in 2022 why does the green mountain care board need to tell blue cross blue shield to try to be efficient you don't i mean and i i think we have lots of evidence for that in this filing and in previous filings we've saved over five million dollars for remote ratepayers through the actions that we took relevant to this filing the number i think was quite a bit bigger than that last year uh these are things we continue to work on we work on all the time um and so when you know when we already include those amounts those savings in our filing um what becomes really difficult is when we're then told go find one percent more and by the way go do it within the next four months that that's just not practical that that's the point that i was trying to make do you believe that blue cross has a responsibility to vermoners to operate efficiently yes i do okay um do you believe that blue cross is doing everything that it possibly could to be as efficient as possible offering um prevention programs that would have an ROI um in in the uh future and things like that that's uh that's maybe not a question for an actuary uh what i what i can tell you is that you know we we don't have carte blanche to just do whatever we want um there's often pushback from providers uh in some ways some of those programs that improve affordability also restrict access and so there's there's pushback from legislators uh and there can be pushback from members so you know we we can't just go out and implement everything we possibly want to in order to reduce the cost because there are a lot of trade-offs and a lot of interested parties uh that want to have a say in those matters but you'll admit that there could be some things that blue cross could do that could make it more efficient i i don't know that more efficient is the phrase that i would use there are steps blue cross could take to make things more affordable whether vermonters or whether the green mountain care board want us to take those steps and whether providers are willing to help us take those steps maybe a different question all together okay um in the testimony um by Dr. McIntosh there was a lot of questioning and i'm not sure this may not be for you and it may be for for Ruth but again um we were trying to get to the percentage of the more expensive hospitalizations that are carried through the exchange product as opposed to Medicare we know that there's a much older age demographic when it comes to hospitalizations in this disease Medicaid and third-party administered plans has any calculation been done as to what percentage of these more expensive hospitalizations relate specifically to the QHB? I don't have the specifics related to hospitalizations what I can say is that blue cross has spent four point four million dollars on COVID related costs uh so far this year okay I believe that you said earlier that um you do not have any involvement in either um investments as far as reserves or as far as reserves or in pension is that correct that is correct who are the people directly involved at blue cross blue shield who make those decisions uh Ruth Green is our CFO and treasurer and she will have the most insight into that process okay I'll save those questions for Ruth then um did you um do any type of review or have any input into the letter that Mr George sent to us in the latter part of June regarding the pension loss no I read the letter that was the extent of my involvement no editing or no correct I was not part of that process okay likewise back in March when we certainly were not aware of it but you reported to DFR according to press accounts that this problem had occurred did you have any involvement at that time in that reporting to the Department of Financial Regulation none okay those are all my questions everybody can go to lunch thank you chairman not quite um there we go opportunity for redirect for Mr is not for you I have no questions thank you okay now we can go to lunch um I was hoping to take an hour but it seems like that may be too long given that we have two more um blue cross witnesses the commissioner which I imagine you guys will have some questions for eleni and then mike fischer so so I'm thinking half an hour lunch break unfortunately what do folks think about that whatever you tell us better than five minutes all right why don't we reconvene at 140 sound good sounds great no sir okay thanks thank you