So it is eight o'clock. My name is Kevin Mullen, Chair of the Green Mountain Care Board, and I'm about to call this meeting to order. And the first item that I am going to do is to appoint Michael Barber as the hearing officer for this rate review hearing. So Michael, whenever you are ready, you can take it away. Welcome, everyone. Okay, thank you, Mr. Chair. Good morning, everyone. My name is Michael Barber. As you heard, I've been designated by the Board Chair to serve as the hearing officer for today's hearing. The purpose of this hearing is to take evidence and argument on MVP Health Plans 2022 individual and small group rate filings. The docket numbers for these cases are GMCB-007-21RR and GMCB-00821RR. Representing MVP today are Gary Carnady, Ryan Long, and Michelle Bennett from the law firm Primer Piper, Agleston and Kramer. And representing the Office of the Health Care Advocate are Jay Angoff, Kylie Kuiper, and Eric Schulteis. I also want to recognize the Board's attorney, Laura Bellovo, who will be conducting the direct examination of the Board's actuaries, as well as Gavin Boyle, as I see, is on the line, General Counsel for Department of Financial Regulation. Because we are holding this hearing remotely before I go any further, I just wanted to call on each of the Board members, the attorneys for the parties and the court reporter to make sure that everyone can hear and be heard. So I'm just gonna call off some names here. And if I call your name, if you could please take yourself off mute and just confirm that you can hear. Chair Mullen? Here. Board member Holmes? Yes. Board member Lunge? I couldn't hear you, Robin, if you said something. I still can't hear you. I'll keep going and if Robin, if you could maybe call in on the phone as a backup unless other folks can hear her. Okay. Board member Heusifer? Yes. Board member Pelham? Yes, and just to remind you sometimes that both Robin and I in Berlin here have a weak internet connection. So I do turn my picture off every now and then when things start breaking up and that seems to solve the problem, but hopefully it won't happen this time. Tommy didn't throw me in there. My internet speed is under two in Colchester. Well, maybe you and I and Robin, we can listen in silence. If you're having problems, you can turn your video off. Otherwise, if you could try and keep it on, that would be preferred, but understand the internet issues. Ms. Bellovo. I'm here. Mr. Carnady? I'm here. And is Ryan not here? Good morning. I'm here. Well, you are. Good morning, Ryan. Well, I was going to say Ryan's wife just had a baby. So he's been behind the moon. I knew there was something. Congratulations. Thank you. Ms. Bennett? Good morning. Good morning. Mr. Angoff? I can hear everyone. I hope everyone can hear me. I can. Ms. Kuiper? I'm here. Mr. Schulteis? Good morning. Good morning. And Sunny, are you? Yes. Good morning. Good morning. Thanks. So Robin, I'm going to come back to you. Can you. Try to say something? Yeah, I can hear you. Can you hear me now? Yes. Great. Okay. Great. I think that. That is it. So we are recording today's proceedings. We also have a court reporter here, Sunny Denath. He's going to transcribe the proceedings and will be, we will be providing the parties with a copy of the transcripts as soon as we receive it. It looks like we have 37. Individuals participating this morning via teams. Because the board members are attending this meeting remotely, we also designated the board's offices, and we will be taking public comment at the close of the proceedings today. However, I can't say when we will be able to get to the public comment portion of the meeting. So if you don't want to. Sit through several hours of testimony, we are having a meeting this. Thursday afternoon from four o'clock to six o'clock. That will be dedicated exclusively to hearing from the public on these filings. And the individual and small group filings from Blue Cross and Blue Shield of Vermont. Information about that meeting can be found by going to the Green Mountain Care Board's website. And clicking on the rate review link. Additionally, you can submit a written comment to the board's website. If you don't want to sit through several hours of testimony, we are having a meeting this. We will be taking public comment. Additionally, you can submit written comments to the board through our website or by regular mail. And we will be taking public comments through July 22nd on these filings. So before we. Kind of begin the hearing. I just wanted to remind the board and the parties to exercise caution regarding information in the binders that's been marked confidential as these matters can't be discussed in the public setting. So if it becomes necessary to discuss confidential materials, we will need to go into an executive session. And we have a separate phone line for that purpose should we need it. So now let's turn to the exhibits. There was some. Emails that were sent out. So I just want to take a few minutes to make sure that we're all working from the same set of documents. So we received exhibit binders on July 15th with 22 stipulated exhibits. Labeled one through 22 as well as two unstipulated exhibits labeled A and B. We then received five additional stipulated exhibits 23 through 27. We have also received revised versions of exhibits for a new five a. As well as revised versions of exhibits 24 and 25. And then a note to remove exhibits 24 a and 25 a because they were being withdrawn. And then finally, Miss Bella was request an exhibit 28 was distributed yesterday, which the parties have stipulated to. So if I'm understanding correctly, if you have a binder, it should have 28 numbered exhibits and two lettered exhibits. Exhibits for a and five a have been revised as well as exhibits 24 and 25 have been revised. And you should not have exhibits 24 a or 25 a in the binder any longer. Does anyone will first of all. Does any do the parties agree with that characterization? Yes, that was a very good summary of a busy weekend. So thank you very much. Does anybody need any time to. Update their binder or are we all set to go forward? I did see Jay's lips move, but I don't know what he said. You're still muted Jay. Still muted. Sorry for moving my lips when I was thinking. I agree with the with what's in the binders today. No objection. Thank you. So unless anyone needs. A copy of one of those documents or some time to make the revisions, I'm going to. Proceed so. I guess at this point, I assume neither party objects to me admitting exhibits one through 28 into evidence. Is that correct? Gary and Jay. No objection. No objection. Okay, then consider that done. And then I understand that the parties wanted to deal with exhibits a and B at the beginning of the hearing and that there is a relevant subjection. Mr. Carnegie, could you please elaborate? Yes, thank you very much. The health care advocates proposed exhibits a and B are two pieces of evidence from last year's rate hearing. Exhibit A is MVP's 13 page. Single spaced actuarial memorandum regarding each and every aspect of the 2021 rate file. Exhibit B is a 10 page single spaced MVP in a interrogatory response to 21 questions with another 10 pages of exhibits. Simply put, the HCA is improperly attempting to relitigate the past. We object to the admission of these exhibits and further move, eliminate a bar HCA council from asking questions about the 2021 rate filing. This is supposed to be a streamlined process, administrative process, tight statutory deadlines. And I fear that you open Pandora's box. If you go down this road, will the HCA be cross examining witnesses about 2016 demographics? Will I be allowed to cross examine Ms. Lee about her recommendation on a medical trend from 2017? And some page from an actuarial memorandum back then where it turned out she was wrong about something. Where does it end? If this evidence and inquiry is beyond the scope of the rate 2022 rate filing, that's allowed the next year we'll need to schedule five days of hearing, not one. We'll set that precedent. So I'd like to go through the three legal grounds why we object to these exhibits going in. First, the board has already ruled on this issue this year and declined to put through interrogatory questions attempting to litigate who was right last year in their predictions. These questions are outside the scope of the rate review hearing this year. On June 7th, the HCA submitted 10 suggested actuarial interrogatories to the board and requested that they pass them on to MVP. MVP objected to actuarial question four on the following grounds. Not relevant, contrary to precedent, not authorized because they didn't seek information about the 2022 rate filing in a waste of resources. So let me read you the question that they had posed. In MVP's 2021 VHC filing, MVP assumed the providers would resume performing a normal level of elective services starting in mid-May 2020 and providers would perform 110% of their prior elective service volume beginning in August of 2020 and ending in April 2021. Applying the same definition of quote normal as used in MVP's 2021 VHC filing did a normal level elective services in fact begin in May of 2020. If not, when during 2020th at all did a normal level elective services begin. MVP had used the actual date on which a normal level services began rather than the mid-May 2020 date. MVP assumed in its 2021 VHC filing by how much would the increase sought in MVP's 2021 VHC filing have been reduced, expressed as both a percent and in dollars. There's a second similar question under number four. So the question is, is this what the board wants to do? Do we want to have detailed questions all day about the 2021 rate filing? Is that what this hearing is going to be about? Well, question four, a portion of which I just read you was not passed through by the board. So you've already decided this and the answer is no. The second ground, the proposed exhibits for the 2021 rate filing are both irrelevant and immaterial and outside the scope of the board's 2022 rate filing review. The board's own rule gives it authority of limit, strike or terminate irrelevant or immaterial evidence. That's rule 2.307 F. Evidence from last year's rate filing has no bearing on whether this year's proposed rates meet the statutory criteria. Evidence from last year is outside the scope of the board's review. So we're going to rule 2.301 B. The board's review is limited by its rules to information about whether this year's proposed rates meet the statutory criteria. Same rule. Third reason, the evidence is not material. The extent that the HCA argues that it would be even collaterally relevant. It would be a waste of time to have a mini trial on issues not relevant to the board's decision this year. The Vermont Supreme Court reviewing a decision of Vermont Public Service Commission, which is currently the PUC, has explained that quote, where an administrative agency has authority to choose the criteria determinative of an issue of fact. It may reject evidence which has no materiality in view of the criteria adopted. That's the petition of Central Vermont Public Service Court at 116 VT 206. The Vermont Supreme Court has explained that collateral evidence that requires time consuming and confusing mini trials to assess its relevance to the instant case should not be committed. The Vermont Supreme Court upheld the trial court's decision to exclude evidence of other people besides a defendant who had motive to harm a victim because of sexual misconduct. Quote, weighed against the limited probative value of defendants' proffered evidence was the prospect of confusion of the issues by a 20 witness mini trial gender and sexual misconduct with no real connection to the offense being tried. That's State P. Gibney, 2003, Vermont, 26. I would also point the board to State P. Burke, 2012, Vermont, 50. The Vermont Supreme Court upheld the trial court's decision, malpractice action against a dentist to exclude the evidence of other patients from the defendant allegedly mistreated, reasoning that quote, the trial court reasonably found that the proffered evidence could require time-consuming and potentially confusing mini trial on each of the four unrelated cases, determinants' facts, similarity and relevance in case of bar, and would be unfairly prejudicial to the defendant. That's wish be lack of toasts. That's 2005 Westlaw 615-412-0. That's a rocket docket case of three-member panel. So that's for persuasive purposes only. The point of all that is we, MVP believes that it would be folly to get into a situation where we're re-litigating past rate filings, trying to point out what MVP got right and what Ms. Lee got wrong. It's a waste of our time. And this is an important ruling, I think. We ask that the board not allow exhibits A or B into evidence based on your prior decision in Vermont law, you further bar HCA council from asking questions about the 21 rate file. Thank you very much. Thank you. Mr. Angoff, do you have a response to the objection? Yes, I do. Thanks very much, Mr. Herring officer and Mr. Chair and members. I may be missing something, but I don't think this is a close case, a close issue. MVP is asking the board to give it money, to give it more money than either MVP or Blue Cross have ever asked the board to give either carrier in the past. We think that it is always relevant for the board to assess the credibility of the party making the request for more money. And in this case, there are certain statements that MVP made last year, which are inconsistent with statements it's made. In this year's rate filing, so for both those reasons that there's inconsistency between this year's rate filing and last year's and because credibility is always relevant. We certainly think that they are. Hang it in there. I'm sorry. Yeah, I think someone does not have their microphone muted. So if everyone could take a minute to make sure that they have their mics muted, except for the attorneys who are speaking, that'd be appreciated. So Mr. Herring officer is my voice coming through. All right. So. If you were. If you were going to hire a plumber, you'd want to know how he's done in the past fixing faucets. If you're looking for an investment advisor, you won't want to know how that investment, how accurate that investment advisor has been in the past. All we're asking is for one 13 page document and one page of another document that I would question the witness about. We're not going to go back. I mean, the stuff that going back 20 years, of course, we're not 15 years or 10 years or even five years. And I agree. You don't want to get into that. But to go back one year to assess the credibility and the accuracy of the, of the party is certainly reasonable. Mr. Carnegie talked about a 20 witness mini-trial. We're not looking for any 20 witness mini-trial. We got one 13 page document in one exhibit. If they're asking you for a lot of money, you certainly have the right to know how accurate they've been in the past when they've asked you for money. Okay. I am going to overrule the objection. I think that the accuracy of MVP's projections in the current filing is obviously a fact of consequence in this case and the accuracy of MVP's projections in last year's filing. And statements made with respect to those projections has probative value with respect to the issue, to the extent there are similarities between last year's filing and this year's filing. I hear the concern about avoiding a mini-trial and the concern about confusion of the issues, I'm wasting time, but to the extent that it is as limited as Mr. Angoff has represented, I'm not going to exclude it on that ground. So I'm overruling the objection. Mr. Carnegie, was there any other grounds for objection or otherwise I'm going to admit it in the evidence at this time? I think I gave plenty of grounds. What I would indicate is I intend to object a long way if a question goes beyond the parameters that you just referenced in your ruling. Yeah, and let me add to that the credibility issue that Mr. Angoff just stated that there are statements in there that are inconsistent with statements that are being made in this filing. So does either party have anything further that we need to discuss before we move to opening statements? Not for the HCA. Okay, then Mr. Carnegie, would you like to make an opening statement? Yes, thank you very much. Appreciate the opportunity today. I represent MVP again in the 2020 rate filing for individual and small group. MVP is seeking a 17.03 overall average premium rate increase for individual and 4.97% increase for small group. This hearing will again provide MVP an opportunity to explain its rate filings and answer any questions of the board. We appreciate this opportunity. The board's challenge this year is different than what it faced last year. Last year you had to determine how to set rates in the middle of an extraordinarily uncertain time in the middle of the COVID pandemic. Thankfully this year your task is much easier. You have to determine how to set rates for a post COVID 2022, a much more predictable time. In Vermont in particular with a vaccination rate of 80% and counting, we're quickly getting back to normal. People are going out to dinner again, seeing their doctors again, undergoing their medical procedures again. I think we would all agree that the pandemic was a once in a lifetime event for all of us. 2020 was an extraordinary year like no other. It was an outlier. And that is what we would ask you to keep in mind as you hear the evidence today. 2020 was like no other. I'm in the legal business and in the legal business, I have what is called precedent. If a Vermont court makes a decision based on the facts and circumstances of a case, it will look to similar past cases decided by the Vermont Supreme Court. The more similar the facts and circumstances of the past case, the greater reliance of court will place on that past case. If the facts and circumstances of the past case are a lot different, then the court is less likely to rely on it. It is therefore less reliable. Courts are not inclined to make a much larger leap to rely on a past case that is different or factual outlier. I believe that the Green Mountain Care Board has a similar task before it today. The evidence you will hear today will show you that the business of actuaries is very similar to what courts do. It is true that actuaries have to make assumptions all the time. But the more assumptions they have to make to get their data to align with future forecasting, the less reliable the forecast becomes. The evidence will show that this year MVP took a simpler approach than L&E. MVP relied on pre-COVID data from the 2019 experience period and trend and then made adjustments for 2022 to set its rates apples to apples. In stark contrast, L&E relied on 2020 data. The evidence will show that L&E took an approach that required a lot more assumptions with a wide range of outcomes dependent upon interdependent moving parts in 2020, such as suppressed utilization, pent-up demand, no more COVID lab tests, no more utilization review rule restrictions, and so on. The evidence will show that L&E took an approach that required a lot more assumptions and no more utilization review rule restrictions and skewing risk adjustments to name a few. You will be presented with these two options of how to set the rates this year. We respectfully request that the board choose the more reliable approach used by MVP, apply the KISS test, keep it simple. The result will be consistent with your statutory charge. 2022 rates will be aligned with the post-COVID world. Thank you, Mr. Ingo. Thank you, Mr. Hearing Officer. We'll get into a lot of riveting discussion about things like morbidity and trend, but I'd like to ask the board at the beginning to just step back and look at this proposed rate increase from a common sense perspective. MVP is asking the board to give it more money, a 17% increase than either MVP or Blue Cross has ever asked the board to give in the past. Again, I might be missing something, but it doesn't make sense to me. L&E has already found that MVP paid out less in 2020 than the amount it used to justify its 2021 rates. That means that the 2020 rates for MVP were excessive and it suggests, doesn't demonstrate because we're only halfway through the year, but it suggests that also the 2021 rates were excessive. I don't get how you get 2020 rates being, 2020 payouts being less than the data that MVP relied on to justify its 2021 rates. I don't get how that translates into a 17% increase. So I just asked the board when you're listening to MVP's testimony to keep in mind three words and they're really three tests.  And the first is transparency. Are they telling you what happened, what they projected last year, what they actually paid out last year, how that differs and how the projections they made last year for 2021 differ from actual so far in 2021. Are they being transparent about what they've actually taken in, what they've actually paid out? Second test is accountability. If it turns out that they did take in much more than they projected they'd taken and or paid out less than they projected they paid out that they would pay out. What happens to that money? Did they rebate it? It doesn't look like that. But what happens to that money? How does the MVP policy holder benefit if at all from that money? Is it rebated? Is it included in this year's rate filing? It should be in our view one of the other. And then the third word I'd like you to keep in mind and to use as a test and in some ways it's the most important is humility. We're all engaged in guesswork here. It's educated guesswork, but it's still guesswork. And then the third word I'd like you to keep in mind and to use as a test and in some ways it's the most important is humility. We're all engaged in guesswork, but it's still guesswork. MVP's been wrong in the past. Other actuaries have been wrong in the past. That's the nature of the actuarial business and they're going to be wrong in the future. Nobody knows and to the extent that MVP tries to convey the impression that there is that there's certainty in any one number. But obviously we'd argue that that's a false impression. We're all trying to do the best we can. It's all and I would just ask the board to keep in mind MVP has been wrong in the past and there is no reason to expect necessarily that they're going to be right this year. Thank you, Mr. hearing officer. Okay, thank you. So now we'll turn it over to you, Mr. Connerty who will call your first witness. Thank you very much. MVP calls Matt Lombardo. Good morning. Good morning. I don't see you on video. Let me take a minute to. Do you have your video on? It should be. Yeah, I can see the light right next to the camera. There you are. Okay. Mr. Lombardo, could you please raise your right hand? Do you swear or affirm that the testimony you're about to give will be the truth, the whole truth and nothing but the truth? I do. Thank you, Mr. Thank you very much. Good morning, Matt. How are you? Good. How are you, Gary? Are you all situated? Do you have your binder with exhibits? I will be full disclosure because of all the cross ups and some changes in the office. I'm working off a combination of electronic electronic and printed documents. So I would just ask that if you're referring to an exhibit, please include the name of the exhibit as well. That will just help me. I'm happy to do that. And I would just let the board know that there may be a time when Matt's looking over at his screen rather than at all view as he talks. And so I apologize for that. We're doing the best we can. Okay. Thank you, Matt. So would you please take your full name? Matthew Lombardo.  MVP Healthcare. And what is MVP Health Plan Inc., please? It's the non-profit HMO subsidiary of MVP Healthcare. And MVP Health Plan Inc. was the filer of these two rate filings, correct? Correct. And what's your position at MVP? Senior leader of actuarial services. And are you a member of any associations? Yes, I'm a fellow in the Society of Actuaries and a member in the American Academy of Actuaries. And how long have you worked at MVP? About 14 years. And how long have you worked in the health insurance industry? About 16 years. And have you been involved in prior rate filings at the Green Mountain Care Board and in Vermont generally? Yes, I've worked on every exchange filing. So this is numbers 9 and 10 plus Vermont filings predating the ACI. And Matt, what are your job duties at MVP Healthcare? Commercial rate setting, which in the state of Vermont as well as the state of New York, I'm responsible for reserving, oversee the actuarial aspects of value-based contracting, as well as forecasting financial competitive intelligence where we look at publicly available documents from competitors, stack ourselves up, as well as ad hoc strategic initiatives. Thank you. Matt, what I'd like to do is get everyone acclimated to the exhibits and go through those with you. So would you please refer to the exhibit list, which is the most recent one that the general council made reference to, which has 1 through 28 on it. Do you have that in front of you? I do. So referring to that, if you look at exhibits 1 through 10, 12 through 15, and 23 through 25, those exhibits include MVP's individual and small group rate filings, responses to objections, and you've reviewed all those and are familiar with them, correct? Correct. And you'll adopt them as your testimony in this case, correct? Correct. And that would include any confidential versions that we have in the binder, correct? Correct. And then exhibit 11, 11, Matt, that is your current CV, correct? Correct. You prepared that? Yes, I did. And then exhibit 16 is the July 6, 2021 pre-filed testimony of yours. You've reviewed that and are familiar with it, correct? Correct. Adopt that as your testimony, correct? Correct, I do. And then exhibit 17 is the July 6, Actuarial Opinions of L&E, the Green Mountain Care Board Actuary. You've reviewed that and are familiar with it? I am. And then exhibits 18 and 19 of the two DFR, Department of Financial Regulation Solvency Analysis Letters. Have you reviewed those and are you familiar with them? I am. And exhibit 20 is July 8, 2021 MVP's calculation of L&E's July 7, Actuarial Memorandum. You helped prepare that? Correct. And you're familiar with it, correct? Correct. And then exhibit 21 is MVP's supplemental pre-filed testimony dated July 12, 2021. You're familiar with that and adopted as your testimony? I do. And then exhibit 22 is Ms. Lee's pre-filed testimony of July 13, I believe. Am I date wrong? You've reviewed that and are familiar with it? Correct. And these exhibits, each of them have little numbers in the bottom right-hand corner. They should be in color in people's binders. So when you and I talk today and I ask you questions, we'll refer to numbered pages. Those will be the numbers we'll be referring to, Matt, okay? Yes. And also generally, there are two rate filings here, exhibit one and exhibit two. To the extent that we're referencing issues today, we relate to both rate filings, correct? Correct. So let's start at a high level, Matt, and just explain the increased numbers, and then we'll identify L&E's recommendations, okay? And then we'll get into greater detail later in your testimony, okay? Okay. So if you would please go to exhibit one and the second page of exhibit one. I'm there. Okay. And you see in the top left-hand corner, there's a general information, and then down below it says overall rate impact. Do you see that? Yes. And this is for the individual filing, correct? Correct. And what's the proposed overall rate impact we're seeking this year? 17.03%. Okay. And that would be the average premium rate increase, correct? Correct. For the individual block of business. And then go to exhibit two. That would be the small group, correct? Yes, correct. And similarly, go to page two. Okay. And in that same area under general information, what's the overall rate increase we're seeking this year? 4.97% in the small group market. Okay. Thank you, Matt. Next, I would ask you to go to exhibit 17, which is L&E's actuarial memorandum. And go to page 21 of that document, please. Waiting for the board to catch up. Just hold on a second. Chair Mullen, I just want to make sure you're with us. Are you in that exhibit? Thank you very much. Okay. So Matt, there's a table on page 21. And there's a row down at the bottom of it that says total proposed rate change. Do you see that? Yes. And there's a 14.4%. Do you see that number? I do. And that's for individual, correct? Correct. So what is that indicating in terms of L&E's view and any reduction to our rate? L&E is recommending a reduction from 17.03% to 14.4%. That's a reduction of approximately 2.2 to 2.3%. It's a little different than just taking a street subtraction. You actually want to just compare the ratio of the two percentages to arrive at the rate increase. So it's a multiplicative approach. Is that right? Correct. And similarly, if you go in the small group column and then the total proposed rate change is 3.3 for small group. Do you see that? Yes. And could you provide a similar explanation about what the delta is this year between MVP and L&E? Yes. Again, you take the division of the two. So we had proposed a 4.97% increase. L&E is recommending 3.3%. I don't have the exact figures in front of me, but I believe it's approximately 1.6%, 1.5% to 1.6% reduction to our rates is what L&E is recommending. Okay. So although straight subtraction, you'd have 1.7 using this multiplicative approach. You end up with the number you just described, correct? Correct. Okay. Also on the numbers again, this year the board has asked us to check L&E's math, which we do now. And we filed a response after seeing their memorandum and just generally were we able to fully do that this year to check their math? No, we weren't. It's because there's methodology differences between the calculation that L&E is proposing for our rate adjustments versus the way that we filed our rates. Thank you. So back to 17, if you go to page five, please, let me know when you're there. I'm there. Under a heading L&E analysis, the second paragraph says the combination of the other rating components will help simplify the comparison to the prior 2021 filing. So could you explain to the board just generally, what did L&E do in terms of looking at these two separate filings? Yeah, MVP utilized 2019 data to set our rates. And then we populated the federally prescribed URRT, the unified review template using 2020 data to be consistent with the federal guidance that was issued. MVP chose to use 2019 data because, as Gary described, as you described, there was less unknowns. In 2020, there were so many outliers that would make it challenging to just come up with a single-point estimate of what the normalization factor is. As an actuary, our job is to project claims and costs in the projection period that would tie out. Given how abnormal 2020 was, it's really challenging to come up with a single-point estimate. L&E chose to use the URRT, which is using 2020 data, to come up with adjustment factors to describe our rate increase. Okay. And as to L&E's analysis, rather than doing, setting aside the URRT issue, rather than doing two different analysis for small group and individual, they combined the numbers for purposes of their analysis, correct? Yes, correct. And you don't take issue with that just for their purposes of analyzing the rate. There's other issues that you have a concern about, correct? Yes, correct. I think L&E is using, we filed two URTs, one for individual and one for small group. They're using those items separately to come up with the adjustments and then blend them together for a simplified document that you can consume. But we're taking issue not with that approach more with just the fact that they're using 2020 data and the URT. Thank you very much. Matt, would you please go to page 20 of exhibit 17? I'm there. And here, L&E's making recommendations. I counted there's seven of them for the combined markets, correct? Correct. So let's go through each one and just we're gonna identify where we have agreement or disagreement and we'll talk about those disagreements later, okay? We're just identifying. Let's start with the first item, the hospital budgets. Do we agree or disagree with what they're saying about hospital budgets and does it have any material, a dollar difference at this point in terms of a dispute? We agree with L&E. In general, we want to align our claim trends and our refiling with what is ultimately approved. So to the extent there's more information between the time we filed our rates in early May and today, we support making those changes so the two are aligned regardless of which direction that goes in as long as our rates change in the same direction as the trends, then we support that. We have reviewed all the hospital budgets that have been submitted and put those through our rate filing and there is a small adjustment that will be made based on the proposed hospital budgets. If I recall, it's approximately 0.1% in the small group market and it's about 0.05% in the individual market. Okay, so as to hospital budgets and you'll get more detail later, there isn't really material difference that would impact the rate filing, correct? Correct. And the second item is a reduction of the pharmacy trend. Do we agree or disagree with Eleni on that point? We disagree. And the third item is the removal of COVID booster costs. Do we agree or disagree with Eleni? We disagree. And the fourth item is the reduce the COVID-19 adjustment. Do we agree or disagree or do you have some other sort of issue with this? This goes back to, we disagree and that goes back to the fact that we're using 2019 data set our rates. So COVID-19 adjustment isn't required. 2019 data didn't include COVID-19 impacts on our claims. We're expecting that there's going to be a couple minor changes, which we've accounted for in 2022 due to COVID, which is a shift in telehealth. There's been increased telehealth utilization, as well as we are projecting a COVID booster shot, as we mentioned in the prior bullet. So the fifth bullet, reflection of updated risk adjustment transfers. Do we agree or disagree? We disagree with that. But just the board understands there, Eleni is indicating that we should increase our rates. So why would we disagree with that? We disagree because of the fundamental premise that we should be using 2019 data versus 2020 data to set our rates. Risk adjustments in 10 is to normalize morbidity in the market. And you should always align risk adjustment year with the experience period year. Because we're using 2019 data to set our rates, 2019 risk adjustment should be utilized. Eleni is recommending that we make an adjustment because of 2020 risk adjustment because they're using the URT. We fundamentally, again, disagree with that approach. 2020, again, it was an outlier year. There were suppressed claims for some time. Prior offs were suspended. Risk adjustment could be skewed because of COVID hospitalizations and diagnoses. There's a whole list of items that could be skewing 2020 data. So we don't believe that you should be using 2020 data to set rates. We should use 2019 projected for an additional year without having to make an adjustment for all those assumptions with COVID impacting 2020. But it is worth noting that if the board adopts Eleni's recommendation to use 2020 data, then we do support making this change because, again, we need to line up experience period year and risk adjustment year. Thank you. So for our purposes, just so the board can follow, the fifth item we disagree with, how about the sixth item, update the bronze CDHP cost sharing? We agree with that. And does that have a material impact on the rate filing? Overall, it does not. The standard bronze high-deductible plan had to change the benefit design between the time we submitted rates and today. The impact on that plan specifically is 0.18%. When you blend that across our entire block of business, it's an immaterial impact. Then the seventh item is the impact of the American Rescue Plan Act on claims. Do we agree or disagree with Eleni on that? We disagree. Thank you. So this year of the seven recommendations, we respectfully disagree with five. Correct? Correct. And the two that we agree on don't appear to have a material impact on the rate as filed. Based on the information available with hospital budgets today, I agree with that. So I want to follow up. You've already testified some about this disagreement about 2019 and 2020. But before we go through all these particular bullets and where we disagree and the particulars of that, just generally, can you explain the disagreement that we have respectful disagreement with Eleni about using 2020 data versus the 2019 data with additional trend? Yes. So I think I kind of hit on it. But as an actuary, our goal is to align costs to align our projected costs with revenue collected, meaning statutory reserve requirements. 2020 because of suppressed utilization for some time, unknown impacts of prior authorization. There was coke being suspended. That's obviously skewing our data. There were COVID lab tests that we experienced in 2020. Risk adjustment is also skewed potentially because there were new diagnoses added to the risk adjustment model to account for COVID utilization and diagnoses. When you account for all those items, there's a wide range of normalization factors they need to apply. If you're going to use a data that is such an abnormal outlier year, you need to normalize your data to get back to your projection for 2022. We chose to kind of bypass that approach because we kind of, our assumption was, why even bother dealing with all those unknowns? We should just use 2019 data when COVID didn't exist and it wasn't really prevalent in the state of Vermont in 2019 because given the high vaccination rate and everything that we're seeing today, we're getting back to normal. We think 2022 is going to be a more normal year assuming that some of these new items like increased telehealth utilization are accounted for. So a fundamentally different approach. That's correct. So let's go to the particular disagreements. Thank you, Matt. Let's start with bullet number two on page 20, which is the pharmaceutical trend. This dispute, if you look at that second bullet, is a reduction of 1.3%. That's what Melanie's recommending, correct? Correct. So I want to ask you first generally about both medical trend and pharmaceutical trend. Are they both driving underlying increases in rates for 2022? Yes. So let's start with the medical trend. Please go to page eight of exhibit 17. I'm ready when you are. At the top, there's a heading total allowed medical trend. Do you see that? Yes. Read the sentence underneath that. Based on the information available, Melanie considers the 6.7% total allowed medical trend to be reasonable and appropriate. So as to medical trend, we have agreement with Melanie, correct? Correct. And explain how you derive medical trend this year. There's two components to medical trend. An allowed medical trend is utilization and unit cost trends. For utilization trend, we did perform a simulated forecast of utilization and we had such a wide range of outcomes because of changes in our membership. The percentile difference was very wide. Melanie had done an analysis using our data and our competitors to get a feel for overall utilization trend in the market using non-COVID data a couple of years ago, or last year even, and they arrived at a 1% was a recommended utilization trend. So that's what we're building into our rates for utilization trend. Again, we expect that the future is going to, we can ignore COVID or the 2020 COVID year from our data, but 1% will resume in the future. For unit cost, we have claims that are, you know, there's providers and hospitals that are negotiated with directly by MVP, as well as we rely on a third party carrier for a national network to provide a national network access to members. And then there's the third component, which is claims that are governed by the Greenmount Care Board. For the New York, for our New York trends, then our directly negotiated trends with providers and facilities, we are including our best estimate of future trends, as well as actual contracted rate increases. And then for the Greenmount Care Board trends, we are assuming that 2020 and 2021 are the approved hospital budgets for each respective year. And then 2022 is unit cost trend will be equal to the 2021 approved unit cost trends. Okay. Let's talk about pharmaceutical then Matt. If you go to exhibit one, and page 15 is where we have an RX trend factors heading. Okay, I'm there. So you can refer to that if you need to, but I have more of a general question. And that is what is happening this year in terms of pharmaceutical cost increases for 2022. We're seeing a big increase in costs. And that's primarily due to specialty drugs. Those are the low utilization high unit cost drugs. They're now, you know, about 50% of overall pharmacy cost. The FDA has expanded some indications where there's more use cases or more approved utilization of some of these specialty drugs that's expanding obviously and increasing the pharmacy costs that we're experiencing. It's worth noting too that if you look at our, if you look at our pharmacy trends by year, which isn't clearly laid out in the refiling, we have an annualized trend that's presented exhibit to be, but if you were to break down our unit cost or unit cost and utilization trends for pharmacy, you'd see that 2020 trend was the highest of the three years. We have 2020 trend, 2021 trend and 2022 trend. 2020 trend was the highest if you isolated that year of trend. And then 2021 and 2022 averaged around 12%. But over the course of three years, we averaged approximately 15.3%. In the URT for reconciling purposes so that we could crosswalk between the URT back to our exhibit to be of a refiling. We populated that exhibit with the three year average trend, which included that higher than, higher than average 2021 and 2022 trend for 2020. Great. We'll get to that in a little more detail. Thank you. How does your current relationship with an effort of your PBM providing prescription drug services lower costs for members? Well, we, right now we're contracting with CVS. We've been contracting with them as a PBM for a number of years at this point. When our contract is up, we do take them out for an RFP to ensure that we're getting best costs. But we do have to focus on the net net cost of a PBM, which is net claim costs, which includes reductions for rebates, as well as administrative costs, because PBMs also help manage back-end systems, claims processing of pharmacy, pharmacy claim trend processing and items such as that. Even during our contract period, we do mid-market, we do market checks to ensure that we're getting best in class discounts. And we sign our contracts with certain clauses to ensure that, you know, if certain metrics aren't met, that we'll be able to get a refund back from them for not meeting performance metrics. And our PBM contract is a multi-year contract. Is that right? Yeah, that's correct. Well, it's not as if MVP could just jump from one PBM to another in any given year, correct? That's correct. And it is a big undertaking because of all the back-end claims processing changes that you have to make. And in terms of how the PBM has been doing, does MVP see any reason to make a change in your PBM relationship? We're not close enough to a very distinctly answer exactly where we are in our contract. What I can say is that, as of right now, we've, you know, we're continuously managing our formulary and managing them, and we don't plan to make a change at this point. When our contract is up, though, we will take them out for an RFP to ensure that we're getting the best costs available. Thank you. If you look at MVP pharmaceutical cost projections, as a percentage of total costs, how is MVP doing in managing costs? Yeah, interesting that you bring that up because, you know, we recognize that our competitor did have some very favorable pharmacy trends or rebate figures in the rate filing. So we wanted to compare, you know, as a benchmark, not just for this rate filing, but as an organization, how are we doing? So we looked at our URT versus our competitors to compare pharmacy costs net of rebates as a percentage of the total allowed medical plus pharmacy costs. And what we found was what we're both projecting for 2022 are reasonably well aligned. Said another way, it doesn't appear that we're an outlier in any way for our 2022 projections when you look at our pharmacy costs as a percentage of our overall costs. Thank you. Next, Matt, I want to ask you about Ellene's pharmacy trend adjustment, what they recommended. Would you please vote at exhibit 21, exhibit 21. This is your supplemental pre-file testimony. Let me know when you're there. You're with me. Take your time. Okay, I'm there. Terrific. And if you please go to question five, and then there's an answer. I'm going to read question five to you. Please explain concerns MVP has regarding the pharmacy trend adjustment recommended by Ellene in its actual memorandum. So I thought it might be helpful for you to kind of walk through your testimony here and explain this to the board, please. Yeah, I think the way that we responded here is probably a little more concise and clear than what I described a few minutes ago. So I'm just going to read the second paragraph starting with the second sentence. The MVP refiling applies three years of trend to 2019 data with the 2020 over 2019 trend being the highest. The URRT is populated with 2020 claim data, which is then trended for two years to 2022. MVP populated the URRT with uniform pharmacy trends, which represent the three-year average trend for 2020 through 2022, even though the URRT is only trending data for 2021 and 2022. MVP took this approach because the refiling does not show separate pharmacy trends for each year, and the trend shown in the URRT reconciled back to exhibit 2B of the rate filing. So the calculation, but if you were to take or 20, if you were to remove the 2020 trend from our URRT, you would arrive at trends of 11.7% for 2021 and 2022 and 12.1% for the small group market. So if we were to make the change from those, if L and E's recommended trend of 9.8% or applied to those lower factors, the rate adjustments would be 0.5% and 0.7% for the individual and small group markets, respectively, rather than the 1.3% reduction they recommended. Thank you. And when we were preparing for this, I kept saying URT, which apparently is not what the URRT is described as, but what is the URRT, please? It is a federally prescribed document that's supposed to show some of the high-level assumptions used to develop a rate. Is the URRT worksheet intended to prescribe a rate development methodology? It is not. If you would please go to exhibit 17, the L and E memorandum at page nine, please. Okay. Do you see there's a table below a heading that says historical allowed RX trends? Yes. And this is L and E's discussion around RX trends. Can you explain the table at the top how they are doing projections and issues you have with it? Yeah, L and E is comparing our projected trends from rate filings to the actual trend that emerged. And there are differences between those two columns, but what they're not capturing our issue is that they're not capturing changes in our market or in our membership base. This is a risk-adjusted market. So if you were to... What you should be doing if you're going to compare projected trends to actual trends without making membership adjustments, there would have to be some sort of a risk adjustment formalization which is really challenging to untangle the medical versus pharmacy impact on risk adjustment. So a recommended approach that I would say would be a better comparison for apples to apples to eliminate that risk adjustment uncertainty would be to take enrolled members at the time that you projected your rates to enroll members actual trends so that you could compare the projected trend to the actual trends on the same membership base. So they didn't account for population changes. Is that correct? That's correct. And did they consider the healthier population we may have attracted in any particular year? It doesn't appear that was addressed. And are the trends that we provide that are provided by the PBM calculated based on a static population at the time the trends are produced? Yeah, the assumption implicit in the trends provided to us by our PBM is assuming that the membership that we have as of the most recent time period will persist into the future. And looking at that table in the years involved, MEP's market share has grown from 10% in 2016 to around 50% in 2020. Is that fair? That sounds about right. And MEP's risk adjustment payment as a percentage of premium is also increased over time? Yes, especially early on as we were growing. Okay, thank you, Matt. Let's go back to the next bullet. If you go to page 20, just so the board can follow us, the third bullet is remove COVID-19 booster costs. Do you see that? I do. And you see the difference there is a decrease of 0.3%. Yes. So let's talk about the booster shots. Since MEP's original filing in May and since the June 25th interogatory response that we submitted on this issue, what are the CDC and FDA currently saying about the need for booster shots? Yeah, the CDC and FDA recently come out and made the statement, joint statement, saying that at this time, there is no evidence that a booster shot will be needed, but they did not at all say that it won't ever be needed. They're just saying that at this time, which is only a few months post-vaccination really taking off. And that's a direct quote at this time, correct? That's correct. And if you could go to exhibit 10, please. Exhibit 10. Which, could you please read the title just to ensure I'm on the right one? Sure. It's the June 25th, 2021 MVP Individually Visual Group Response Letter Number 5. Thank you. Okay, I'm there. Okay, and this was our response on the booster issue back in June, June 25th. If you go to the second page, there's a couple of references to some pharmaceutical companies. I see Moderna and Pfizer. Do you see that? Yes. So what are Moderna and Pfizer doing as it relates to booster shots? They're developing, they're researching and developing booster shots and they're anticipating that they would have a booster shot available by this fall. And are they planning to seek FDA authorization? Emergency use authorization, yes. That's my understanding. And since the statement, the joint statement where the CDC and the FDA said, you know, Americans were fully vaccinated, don't need a booster at this time. Since that statement, are you aware of Moderna or Pfizer stopping their efforts to work on the booster? I am not. Now, aren't these two companies, ones that developed the vaccine, the COVID vaccine last year? Yes, they did. And they did that in a matter of months rather than years, didn't they? Yeah, that's correct. I think Senator Portman over the week, and you probably didn't see it, he called it a miracle. Would you agree that what they did was extraordinary? Yeah, so, yeah, it was, and it's great that it happened that fast for all of us. Is it actually sound to include this cost in the rate filing in your opinion? It is because our objective is to align costs with our premiums with our costs. I know what's saying at this time, the CDC and FDA are saying at this time, they don't see the need for a booster shot, but we're preparing for 2022 rates. By then there may be some reduction to immunity levels and there's also all this news coming out lately of the Delta variant and new variants that are hitting. So in our opinion, we should be including these costs because we do expect them to ultimately be utilized in 2022. Are you familiar with the actual, actuarial standard of practice 26, section 2.1 that defines actuarial soundness? Yes. And is actuarial soundness defined to include that the rates quote are adequate to provide for all expected costs and quote? Yes. And is this in your opinion, the COVID booster and expected cost? Based on the data available, we believe that it will be approved and will be utilized or will be at least approved for emergency use authorization. And last year, did MVP include the cost of the new anticipated COVID vaccine in its proposed rate filing? We did. And that was based on similar reports from the pharmaceutical companies, correct? Correct. It was based on the data available at the time that we had. And was MVP right? Yes. And respectfully, the board disagreed with us last year on the vaccinations being paid for as part of the rate filing, correct? Yes, that's correct. Thank you, Matt. Okay, let's go to... The introduction, Mr. Chair, I just want to confirm that we didn't lose Mr. Angoff. We don't have his picture anymore, so I just want to make sure that he's still part of the proceeding. Yeah, I see his bubble. Mr. Angoff, could you take yourself off mute and just confirm that you are with us still? It's like you might have stepped away for a second. Would you like me to continue? Is other HCA Council online? Happy to wait. Any objection to continuing to keep the flow here? I think that's fine. Mr. Herrine Officer, thank you. Okay, thank you. Matt, if you please go back to exhibit 17 and page 20. I just want to keep going with our roadmap. We're up to bullet number four, which is the use of a COVID-19 adjustment. So let's go to page 12 of the exhibit so the board can follow us. Let me know when you're there, Matt. I'm there. And see at the bottom it says COVID-19 impact. There's a heading. Yes. And so page 12, then going into page 13, there's a discussion about it on the bottom of 12 into page 13. Do you see that? Yes. So would you please explain what Eleni is doing here in terms of considering 2020 claims? Yes. Again, Eleni is using the URT to develop adjustments off of our proposed rates. And because they're modifying our trend, because we use 2019 data, part of the URT instructions is that you're supposed to align your projected claim costs with the market adjusted index rate, which is basically your projected claims, allowed claims, which would be MVP's expense plus member cost share, net of risk adjustment. Because MVP use 2019 data to set our rates, the COVID-19 impact of 6.5% that Eleni is referencing is basically a normalization factor to take the URT from a 2020 basis or from our rates from a 2019 basis to the 2020 URT basis. And because Eleni is recommending, so to go back to the bullet, to tie this into the bullet, where they're recommending a reduction to this factor, the reduction is driven by the fact that in the URT, Eleni is recommending a change to the pharmacy trend. When that happens, it reduces, it has a downstream impact. Would you please go to page five of the exhibit, exhibit 17? And at the bottom of page five, there's a heading 2020 actual slash projected claims experience. Do you see that? Yes. Would you please read the first two sentences, and then this goes on to page six and the referenced footnote. You don't need to read the whole footnote just the beginning of it, please. So the first two sentences or read the first three? I just want to clarify. First two, please. Okay. Actual 2020 claims experience for the individual and small group markets was approximately 3.3% lower than the 2020 costs expected at the time of the 2021 rate filing. One major driver of this outcome is decreased utilization related to the COVID-19 pandemic. You caught me in a math error. Please read the third sentence too. While actual 2020 experience has varied across the nation by carrier, declines have typically ranged between 4% and 16%. And then there's a footnote to a Kaiser Family Foundation article, correct? Correct. So would you explain any concerns you have about this range that's referenced? Explain what it is and then explain concerns. The Kaiser Family Foundation did a comparison of historical profit margins by across the country to estimate, they're using that as a proxy, those comparisons as a proxy for the impact of COVID-19 on claims in 2020. That's a reasonable calculation, but as you can see, the range is about 12%. It's from 4% to 16%. So carrier by carrier, we're seeing much different outcomes. And it's worth noting that this is an approximation being used as a proxy for overall impact. Again, there's different changes in each state, not every state that I'm aware of had all of the state of emergency impacts at the state of Vermont had. So us having to lack prior authorization as a carrier is having an impact on the way that we can help control costs. COVID lab testing has been very high. Those are also skewing claims. So it doesn't seem like it's a perfect calculation, but it does provide a reasonable approximation with a wide range of 12%. And then if you go back to page 5. Excuse me, Mr. Hearing Officer. I just want to, Mike Fisher here, I just want to let you know that maybe Jay is back from his technical difficulties, nevermind. My profuse apologies. I can now hear and see and I heard everything that was going on before. Great. Thank you. Okay, Matt, you talked about the wide range and having concerns about the wide range. Then you go back to page 5. That first sentence you read, what is L&E doing in terms of pinpointing and do you have a concern about that? Yeah, L&E is coming up with an impact of 3.3%. Again, it's because of all those moving parts, we don't see why you would choose to try to come up with a single figure when there's such a wide range that could be impacting 2020. Our projection using 2019 data eliminates all those concerns. So it just doesn't make sense to us why you would add this complex high variance assumption to develop a rate recommendation. In fact, as everybody's aware, MVP operates in New York as well as Vermont. The New York regulators actually dictated that every carrier in New York state has to use 2019 data to set our small group individual rates to eliminate the noise that's being seen in 2020. They basically said to keep the market from massive amounts of potential disruptions and up and downs and rate increases. We'd prefer that everybody were telling you to have to use 2019 data, ignore 2020 data. So by using 2019 data, you avoid this problem of the wide range of possible results and picking a pinpoint within that range, correct? That's correct. And you mentioned the New York state regulators. That was the Department of Financial Service. That's correct. And do you know whether they made an inquiry to the various carriers on what the carriers felt would be the better data point? Yeah, they solicited feedback from carriers throughout the state. And although I didn't see every carrier, not every carrier voice their opinion vocally on a team's call, it was nobody, no carrier, no actuaries had an issue with using 2019 data. It was all, it was preferred pretty much across the board. And order of magnitude, is it? We're a little Vermont. We don't have as many carriers. How many carriers are we talking about? Just order of magnitude. Probably in the range of 10. Thank you. Plus or minus four or five. Thank you. That was answered like an actuary. That was very good. Are you surprised that L&E adjusted from MVP's use of the 2019 data to it using 2020 data in its extroferial memorandum? Yes. I mean, at this time last year, we were already thinking about, what are we going to do for 2022 refilings? Because we're sitting here in the middle of a pandemic. There's all these differences. We know 2020 data is going to be really skewed. We know how challenging it is to isolate all those different moving parts and then come up with a single point estimate. So in February, I reached out to L&E to ask them if they were going to dictate the experience period to use or if they would accept us choosing 2019 or 2020. They told us that it was okay, as long as we just provide an explanation of why we were choosing, making the decision we were making. And that was a communication with Ms. Lee? That's correct. Mr. Lombardo, you were asked in an interrogatory, what if MVP had used its 2020 experience period instead of 2019? You indicated that MVP would have then used a normalization factor to undo the reduction in cost due to COVID-19. Well, my question is, why didn't you do that then? Why did you just use the 2019 data? If we were to, you know, if L&E or the board dictated that we use 2020 data to set our rates, we would have essentially run our rate filing in parallel using 2019 data and 2020 data, come up with our rates using 2019 data and backed into a normalization factor. It was, that is a much cleaner approach, in my opinion, to come up with a single point estimate rather than trying to isolate the impact of potentially risk adjustment anomalies, suppressed utilization, COVID lab testing, impact of prior off, potentially pent up demand that was hitting later in the second half of 2020. All those items made 2020 really challenging to come up with a point estimate, so our decision was use 2019, and if we were dictated to use 2020, we would have essentially just backed into what the factor was. Thank you. Okay, Matt, let's go back to our roadmap, please go to page 20. There are bullets, and there's a fifth bullet risk adjustment transfers. Let me know when you're there. I'm there. And that's the 0.4% increase that we talked about at the opening of your testimony, correct? Correct. So if the board agrees with MVP and throws out L&E's use of 2020 data, how would that impact their suggested increase of risk assumption? Yeah, they would change the risk adjustment time period to match with the experience period. Because of those changes, we would have an approximate increase of 0.4%. Again, the intent of risk adjustment is to normalize for market morbidity risk.  Our claims will come through lower than our competitors, even if we had the exact same unit costs and contracted discounts with hospitals, same exact utilization management programs in place. Risk adjustment then brings those two together. So you're competing on apples, apples playing field on a level playing field. So if 2019 claims were used to set rates, but 2020 risk adjustment were utilized to normalize those rates, that wouldn't make sense because you'd be having apples and oranges comparison. So L&E is just saying, if we're going to use 2020 data, which is implicitly being used by them because they're using the URT to come up with adjustments, we should be normalizing for risk adjustment, 2020 risk adjustment. We do agree that if the URT is being used to set our rates, that 2020 risk adjustment should be used. We just fundamentally disagree with using the URT and 2020 data to set our rates. So if the board agreed with L&E, then we would agree to the 0.4 increase, correct? That's correct. That's correct. Thank you. The next bullet, the seventh bullet, excuse me, bullet six we agree to. So bullet correct? That's correct. Okay, so let's move to the last bullet. That's reflect impact of American Rescue Plan Act on claims. Do you see that? Yes. And they've indicated this represents a merged market impact of 0.1%. Correct? That's correct. So it's a decrease of 2% in individual rates due to expected morbidity improvements. That's their opinion, correct? 0.2%. I believe you said 2%. So just to make it clear. Yes, thank you very much. But for the board's purposes, the merged impact here, we're talking about this is a 0.1%. Correct? Correct. Please go to page 10 of exhibit 17. And at the bottom of the page, let me know when you're there. We're there. There's an American Rescue Plan Act heading. And then there's a discussion about the act that goes into page 11. You see that? Yes. So I want to kind of walk through this and ask you some questions. What are L&E's presumptions regarding uninsured people that will be enrolled? L&E is assuming that the new individuals enrolling, if they are to enroll, will be healthier than the current population. And do you take issue with that presumption? Yes. I mean, we did review the Vermont Household Insurance Survey, and it is true that the population that's uninsured does appear to be a younger population than the average enrollees in the individual market. Our issue is with the fact that we're not sure how many people are actually going to enroll is one thing. And then another item is these are members that presumptive, our assumption is they have not had care delivered to them in recent years. They may have some high morbidity conditions uncovered that were going untreated. That's great because then they can get them treated, but that doesn't necessarily translate to a healthier population. Given the number of members that L&E is projecting will enroll, it would only take a couple of those higher cost members to basically wipe out the impact of that downward adjustment. Thank you. To that point, go to page 11, the fourth paragraph. Let me know when you're there. Okay. Read the last sentence in that paragraph, please. L&E assumes that this new population will be 10% healthier than the currently covered population. Man, I got a little lost. I apologize. Page 11, there's a... It's the third full paragraph starting L&E notes. Do you see that? Yeah. Would you... L&E notes that the uninsured population with incomes just above 400% FPL will see a 40% reduction in premium, while the premium reduction becomes smaller as income increases. Based on this change in premium, L&E believes that approximately 800 new members will enroll. 800? That's a pretty nice number, although they say approximately, right? Correct. Is that a safe presumption in your view? It's an assumption. Actuaries make assumptions. It's... I don't know the detail behind how they arrived at that figure, though. The second paragraph on page 11, this is where L&E summarizes MVP's views on this issue, correct? The second full paragraph, yes. Thank you. And basically, MVP does not assume any change in morbidity, correct? Correct. Why is that? It's just an unknown. It's a wide unknown. Because of the items that I was referencing before, whether or not the people that are going to enroll, if they do choose to enroll, some members just elect not to have coverage. We saw a steady state of approximately 2% of Vermonters weren't purchasing coverage, or weren't rolling, even if they were eligible for a Medicaid program. So it's unknown why these people aren't rolling. It could be cost, some of it could just be that they fundamentally don't want to go through the mechanism or have insurance. They don't believe in it for some reason. So it's just an unknown and it's something that we felt there was a wide range of outcomes. It wasn't very predictable at this point in time, so we chose to not make an adjustment. Thank you. So let's go to the fifth paragraph which starts out, it is expected that. Do you see that paragraph? Yes. Read it please. It is expected that this uninsured population has not purchased coverage to date either due to good health or due to the high cost of premiums. Eleni assumes that this new population will be 10% healthier than the currently covered population. So it says 10% right? Yes. Why not 9% or 13% do you know? I don't know. Does Eleni cite any studies of the health of Vermonters or other health data in their opinion here? They do not. Aren't actuaries supposed to rely on data rather than their own assumptions about the health of Vermonters? In the best of our ability, we try to use data that's available to us to estimate to make our assumptions. For example, in our COVID flu shot assumption, we leverage flu vaccine utilization as a proxy for it in cost because our assumption was if people are going to try to prevent the flu, they're also going to choose to prevent COVID from hitting them. So, you know, we try to make assumptions that are grounded in some sort of data. Thank you. Okay, Matt, those were the issues in dispute. I want to touch on a couple of other issues if we could. If you please go to exhibit 17 page 10. Okay. And I want to talk about telehealth related costs. If you look at the sixth paragraph, there's a heading increase in telehealth utilization 0.3%. Let me know when you're there. I'm there. So, MVP is requesting a 0.3% increase as part of their rate filings that would be related to telehealth utilization, correct? That's correct. Would you read the last sentence of that paragraph? Eleni considers this to be reasonable. Something we agree on, correct? That's correct. Good news. Okay. Now, Matt, would you please explain the telehealth increase and I want to ask you about an exhibit we put in yesterday, but first just talk about the telehealth increase generally.  In 2020, post pandemic, we ended up with a PMPM amount of approximately $17 in telehealth costs. That wasn't if those were one-to-one replacements for in-person visits, there wouldn't be an impact. What we know from some member information as well as our data is that there's actually been instances where prior to the pandemic, there weren't the claim wasn't being filed.  And this isn't against pediatricians. This is just one specific example.  The doctor on call would call you back, have a minute or two conversation and you wouldn't be charged. Now we're seeing instances where those calls, those one-to-two minute calls are actually being charged. Additionally, there's instances where somebody will call and say, I'd like to have, can you help me understand exactly what's going on with me? And if that visit can't be handled through either audio or visual purposes virtually, then the doctor is saying, okay, well we need you to come in. So there's an additional visit that's associated with it. Those items are leading to this cost increase. Thank you. Now, yesterday the board asked and we stipulated to exhibit 28. Would you please go to that exhibit? Okay, I'm there. Now, this is a DFR order Department of Financial Regulation order dated June 29th 2021 relating to audio only telephone service. Correct? Correct. And had you seen, have you seen this particular order before yesterday? That was the first time that I personally had seen it. Others at MVP had seen it but yesterday was the first time that I had seen it. So I'm going to ask you some questions but with the caveat that you might not have all the answers just yet to these questions because this came in yesterday. Okay, so if you go to page eight of the order it's the very last page and there's a section B. It's actually 3B carry. Okay. And let me read that to you. It says health insurance plans shall reimburse providers for audio only services at a rate no less than 75% of the rate for equivalent in-person or audio visual telemedicine covered service. Period. Plans are strongly encouraged to negotiate rates with providers for audio only telephone services that reflect their clinical value. Did I read that right? Yes, you did. So Matt, the issue here I think is what is MVP doing as a result of this order in terms of charging paying 100% or paying 75% or something in between can you explain it please as you understand it? Yeah, so as I understand it based on conversations we had a few months ago when we were trying to develop our assumptions for our rates. We were talking we worked with our clinical team because we're trying to balance cost with clinical effectiveness. So the clinical team is trying to figure out what is that right balance and we're deferring to them to some extent to come up with the payment policy and we were also waiting for this guidance which came out about 20 days ago to help inform how we would set our payment policy. I know my understanding and my knowledge is that it has not been finalized yet by MVP but we have bantered around concepts such as reimbursing behavioral health telehealth visits at 100% of in person and then reimbursing other visits at a lower reimbursement rate trying to balance trying to strike that proper balance of clinical effectiveness and quality versus cost. So at the time that we set our rates we didn't have any information other than the data that was we didn't have DFR's guidance so we were just using our data post pandemic compared to our pre-pandemic data to derive that adjustment so our assumption is assuming the state of emergency reimbursement for telehealth. That would be at 100% Yes. And then if I understood your testimony you're not sure you well let me ask you did you reached out yesterday to try to get clarification on this correct? That's correct. Well it may be something if the board has questions we can get the answer but as it stands now your general understanding is as to mental health and would that be substance abuse too? Yes. There'd be 100% reimbursement and then for non-behavioral it would be somewhere between 75 and 100 but you really don't know. Is that correct? That's correct and the 100% is in set in stone. The last time I heard about this which was a couple of months ago when we were setting our rates that was where our clinical teams' brains were kind of situated I don't know if they've changed that opinion since then. We would have to follow up with them more formally. Material impact on the rate the 0.3% would you give the board any sense? I think that's I think that's all relative 0.3% is if I look at that we build 1.5% profit into our rates so 0.3% is approximately 20% of our entire profit margin right? If that's not accounted for. Our job is actuaries as you referenced earlier ASAP26 is to align premiums with total costs so that's what we do with this adjustment. So fair enough so let me ask you a different way. You can't say whether what we just described in the 75% versus 100% once that policy is in place. As you sit here today you can't tell the board whether that would change that 0.3 number in any way, correct? That's correct. What I can say is that a large portion of our shift in services from in person to virtual or in person to telehealth behavioral health bucket that was we kind of organized our data by behavioral health versus non-behavioral health for this analysis and when you saw the increase in the overall change in cost so it was primarily driven by behavioral health utilization. Thank you. Next Matt, I want to shift gears and ask you and you heard Attorney Hangoff's opening and he kind of touched on this and that's accounting for administrative expenses from year to year. I want to ask you about that generally, okay? So first I think I'd ask you to go to exhibit 17 again, page 15. Okay. And there's a heading number 10 in the middle of the page that says changes in administrative costs. Do you see that? Yes. And this is Ellen's discussion of MVP's administrative costs, correct? That's correct. And would you read the last sentence in section number 10? Ellen E. considers the assumed 2022 administrative costs to be reasonable and appropriate. Thank you. So Ellen E. This year we're in agreement on our administrative costs, correct? That's correct. So let me go back to this general question. If MVP's administrative expenses for this year end up being more than was estimated and approved in a rate filing, is it actually sound that the additional amount MVP had to spend, excuse me, is it actually sound to consider that additional amount that MVP had to spend and simply raise your rates next year to pay MVP back for the additional spend? Well, it would depend on what our projected future costs are. So in general, it would not be unless it's a known item that you'd have to adjust for in the future. Similarly, if MVP's actuarial, excuse me, actual administrative expenses come in lower than what was estimated and approved in a given year, is it actually sound to simply fold those savings in your consideration of the rate filing in the next year? It goes, it's a two-way street. If we expect those costs to persist, then we should be adjusting, but if we there's a known change in our administrative cost structure, then we should make an adjustment to account for that. When setting premium rates, is your task to align and pay for the projected cost of services for the rate filing year, in this case for 2022? Yes. And align those with the administrative expenses for 2022, is that correct? That's correct. Now I want to pivot to hospital budgets. That was item one in the recommendations this year from Ellen E on page 20. So I think you've testified before that generally we're in agreement without Ellen E on approach as the information comes in, correct? Correct. If you would go to exhibit one, which is our rate filing for individual, and go to page 14, please. Okay. So there's a heading, just if you need to refer to this MVP trend factors, would you tell the board what assumptions MVP made about hospital budgets this year? Yes. For 2022, we assume that the approved 2021 hospital budgets would be applicable in 2022. Okay. And then as you've testified, you received all the proposed budgets in recent time, and reviewed those, and done some calculations, correct? Yes, that's correct. And did that cause you to make any material change in the requested increases this year? It was approximate. Very large change by any means. It was, when you blend the two markets, it was less than a tenth of a percent. Less than a tenth of a percent, correct? That's correct. Okay, if you go back to exhibit 17, page 7, please. And this page includes a hospital budget review discussion by Ellen E, correct? Correct. And would you read the fifth paragraph that Ellen E believes? Ellen E believes utilizing recent hospital budget figures for the assumed unicost trends is reasonable and appropriate. Once 2022 hospital budget requests are submitted, Ellen E recommends that this new information be considered. And MVP has done exactly that, right? You've considered the new information? Yes. The next heading is medical utilization trend. You see that sixth paragraph? Yes. And would you read the last sentence on the page, please, under that heading? Based on the above analyses, Ellen E considers the assumed utilization trend of 1 percent to be reasonable and appropriate. Thank you. To summarize your opinion, Matt, are MVPs 2022 proposed rates for individuals of 17.03 percent and small groups of 4.97 percent with or without this 0 to 0.1 adjustment you testified to for hospital budgets that's approved by the board? Are those rates as filed with that potential adjustment actually sound and reasonable? Yes. And I want to ask you about reserves and solvency. What is MVP's proposed contribution to reserves this year? 1.5 percent. Okay. Exhibit 18, please. That's the small group? Gary? Yes, that's the small group. Thank you. So, Matt, exhibits 18 and then 19 behind it. These are the DFR solvency letters for small group and individual group respectively, correct? That's correct. And you've read them and are familiar with them, right? Yes. And are the letters identical in substance with the exception of 18 references to small group and 19 references to the individual? Yes. So, let's go to exhibit 18 and read under the heading Summary of Opinion at the top of the second page. Please read that. The proposed rate filed by MVPHP would not negatively impact its solvency and the company otherwise meets Vermont's financial licensing requirements for a foreign insurer. Would you agree with that statement? Yes. Assuming that our rates are actually sound, yes. And are our proposed rates actually really sound? Yes. On that page, number two, if you would please read the third bullet under MVPHP solvency opinion, please. Finally, in 2020, all of MVP holding company's operations in Vermont accounted for approximately 7% of its total premiums writ. DFR has determined that MVPHP's Vermont operations pose little risk to its solvency. Nonetheless, adequacy of rates and contributions to surplus are necessary for all health insurers to maintain strength of capital that keeps pace with the claim trends. Do you agree with that statement in the third bullet on page two? Yes. We have to meet statutory reserve requirements to disrupt the market and not provide members with peace of mind. It could lead to carers going in solvency. And go to the third page, please of the exhibit. And please read under the heading impact of the filing on solvency. Based on the entity-wide assessment above and contingent upon GMCB actuaries finding that the proposed rate is not inadequate, DFR's opinion is that the proposed rate will not have a negative impact on MVPHP's solvency. And you agree with that statement? I do. And that would relate to both exhibit 18 and 19, correct? Correct. If you go back to L&E's report, which is exhibit 17 and go to page 16, let me know when you're there, so exhibit 17, page 16. So there's an item 12 change in contribution to reserves of CFR. Yes. And under, in that section, would you please read the first sentence in the fourth paragraph starting L&E believes. Yep. L&E believes the CTR and bad data assumptions are reasonable and appropriate. So L&E agrees with us on our CTR of 1.5 this year? Yes. In this section, there's a second paragraph that makes a reference to it as a reasonableness check. Do you see that? Yes. And this is something that L&E's done, I think, in the last couple years, correct? Correct. So can you tell the board what L&E is doing here? L&E is scanning publicly available information, other QHP filings to evaluate and they're basically ranking every QHP filing available by year from based on contribution to reserve from lowest to highest. What they're finding is that MVP every year is somewhere between the 70th and 82nd percentile meaning sorry, we're between the 18th and 30th percentile meaning that we're at kind of an outlier on the lower end of the range. So we're going to look at what kind of carriers are proposing CTR that exceeds the 1.5 percent that MVP is proposing. Thank you. And just to drill down a little bit on that. So in 2021 it was 70 percent, correct? Correct. And in 2022 it was over 80 percent of the filings assumed as CTRs higher than 1.5. In 2017 it was 82 percent. Thank you. So what if the CTR were 0.5? So rather than 1.5 it were 0.5 like the board reduced our CTR last year. What would happen to those percentages generally? We'd become an even further outlier towards the bottom end of the range. In your opinion will the MVP file rates potentially impact the solvency of MVP healthcare inks? The proposed rates will not. You anticipate that the contributions to reserves would require a change based on the hospital budget proposals that we've discussed in your range of possibly a 0 to 0.1 percent adjustment. Those changes want to impact CTR. Thank you. Matt I want to shift to non-actuarial issues. Would you go to your pre-file testimony which is exhibit 16? Okay. And this year similar to last year we've addressed at least in part non-actuarial issues in the pre-file testimony, correct? Correct. So would you go to page 6 please? Let me know when you're there. Sorry my exhibits are actually this is where my exhibits got here with me. Okay I'm there. And would you go to question 19 which is on page 6? I'm going to read the question to you. What steps does MVP take into lower cost and establish those proposed rates promote affordability, access to care and quality of care for Vermonters? See that question? Yes. And the response lists 16 items going into page 8, correct? Correct. And some of those items have additional cross references to other responses that flesh out the response, is that fair? That's fair. With these items as well as your testimony today and all the other filings evidence some of MVP's steps to lower costs, promote quality of care and access and establish that the rates proposed are affordable to Vermonters. I agree with that. And will short term underpricing make insurance affordable in the long run? It will not. Okay Matt, so each year we need to go through the statutory criteria. I'm going to do that now and I want to preface it with this. We're talking about both filings both individual and small group when I ask you these questions and the individual small group is 4.97 and strike all of that let me say it differently. The rate for an individual is 17.03 and the rate for the small group is 4.97, correct? Correct. And then with possible reduction in the range of 0 to 0.1% for hospital budgets so all these questions I'm going to ask you will have that frame. Does that make sense to you? Yes, that makes sense. Do the AP rates meet the standard of affordability based on rate the rate filing, other evidence and your testimony today? Yes, they do. Do the rates promote quality of care and access to health care based on the rate filing, other evidence in your testimony today? They do. Is the rate filing unjust, unfair, inequitable, misleading or contrary to law on the rate filing, other evidence and data that we have? Yes. Are the rates actually sound and fairly charging premium for services covered? They are. Are the rates excessive, inadequate or unfairly discriminatory? They are not. Are the rates reasonable relative to the benefits that are offered? They are. Do they provide for payment of claims, administrative expenses, taxes and regulatory fees and have reasonable contingency and profit margins? They do. So they are adequate? That's correct, they are. Do the rates exceed the rate needed to provide for payment of claims, administrative expenses, taxes, regulatory fees and reasonable contingency and profit margins? They do not. So they're not excessive? Correct. Do the rates result in premium differences among insurers within similar risk categories, which are not permissible under applicable law and do not reasonably correspond to differences in expected costs? They do. I think my double negative might have confused you or maybe I'm just confused, but let me try that again. Do the rates result in premium differences among insurers within similar risk categories, which are not permissible under applicable law and do not reasonably correspond to differences in expected costs? They're in compliance with the law and they do not. Thank you. So your earlier response was an error, correct? Yes, it was. So they're not unfairly discriminatory, correct? That's correct. Would you agree with me that the statutory criteria we just went through are interrelated? Yes. Any adjustments to a rate increase for whatever reason all feed in the final number? Yes, that's correct. I agree. It's important that the final numbers actually sound unreasonable, correct? Correct. In this case, 17.03 for individual and 4.97 for small group, correct? Correct. If the board cuts the final number on non-actuarial grounds, is there a risk that the rate would no longer be adequate? There is. In contrast, based on your testimony and the other evidence, the insurance products is affordable with a 17.03 for individual group and 4.97 for small group increase and meets all the statutory criteria, correct? Correct. That's all the questions I have for this witness at this time. There might be a rebuttal later in the day. So I think that was a good time to take a 10 minute break unless someone feels we need to press on. I think a break is appropriate and then we'll reconvene at 12 after and start with cross and then move on to board questions and board members so that you are thinking ahead. I'm going to start with member Yusuf and then move to member Lunge, member Holmes, member Pelham and the chair. So why don't we reconvene at 12 or 13 after now? Does that sound good? All right. I can see everyone's here except for board member Pelham. Tom, are you with us? I'm here. Do you have any internet problems? No. Good deal. Since it looks like we're all here, why don't we go ahead and go back on the record in the matter of MVP Health Plan Inks 2022 individual and small group rate filings. We left off with Gary finishing up direct examination of Matt Lombardo and I'll turn it over to you, Jay. Do you have any questions for Mr. Lombardo? Yes, I do. Thank you very much, Mr. Hearing Officer. I apologize to you and to everyone for the interruption that I caused when I was off screen. You might enjoy the reason. I pressed a button on my computer by mistake which rotated everyone 90 degrees. So I was trying to see if I could possibly actually conduct an examination like that and concluded that I couldn't. My daughter happens to be home and so she came up and fixed it. So that's the explanation and again, I apologize. With that introduction, good morning, Mr. Lombardo. You are a fellow of the casualty, I'm sorry, a fellow of the Society of Actuaries, right? That's correct. Okay, and so the person that prepared the rate filing is Chris Pontiff. Yes, he signed the documents, he reports to me and I had oversight on the preparation of the rate filing. Okay, so you supervise him? Yes. Okay, and so you would agree with me then it's fair for me to ask you any question about the rate filing that I would ask Mr. Pontiff. That's correct. Okay, and do you supervise all the actuaries that prepare rate filings? Commercial rate filings, yes, Medicare business. Okay, but this is person lines, right? This isn't commercial. Is it? This is commercial. So this is commercial business, but we bucket small group individual large group as all commercial business. Medicare is separate. I get it. I'd like to ask you a couple of questions about preparing the rate file. When you sit down to prepare a rate filing or supervise the person that is preparing the rate filing, do you go back and look at the last year's rate filing and ask what we got right, what we got wrong in that filing? On a high level, yes, but not every exact piece of detail. What we're doing is trying to set our rates based on the data available to us today and set our rates for the future year. So if it turns out that under the prior years rate filing you took in more than you had projected that you were taking, what, if anything happens to that difference between what you projected you would take in and what you actually took in? We're trying to set an actuarially sound rate, which is to project the claims for the upcoming year or the projection period and then we would make adjustments as needed. If what happened in 2020 was something that would persist in perpetuity, then there would be an adjustment made that would reflect that. But, you know, the same goes both ways. If rates are, if claims exceed rates, then we don't make adjustments to make up for those losses either, unless it's something that we expect to persist into the future. I understand that. Let me ask it this way. To what extent, if any, is the difference between the amount that you projected you would make in 2020 in the 2021 rate filing and the amount that you actually made reflected in this current rate filing? It's not reflected because we don't expect the outlier year that was 2020 to persist into 2022. And right now, when we look at our 2021 emerging data, we're seeing the exact opposite of what happened in 2020. We're 8 to 10% behind our target run rate. And if that's a one-time event, we don't expect to have to pass that through into future rates. It's really just a matter of using the data available, understanding it to the sense possible, making adjustments, or not making adjustments by ignoring 2020 data, and then projecting future costs to be aligned with premiums. Did you calculate a rate of return on premium for the in connection with your 2020-21 individual rate filing? The 2020 or 2021? The filing you made last year for your 2020-21, the filing you made in 2020 for your 2021 rates. We projected in 2021, we built in 1.5% profit margin and I believe that the board approved a 0.5% contribution to reserves. Okay. I don't think that answers my question. Did you calculate a rate of return on premium in connection with your I guess it's not clear what you mean by rate of return. I thought you were asking me for contribution to reserves. No, I was asking you for a rate of return on premium. Did you calculate a rate of return on premium? I guess it's hard for me to answer that question because it's not clear what you're asking me. We built in a 1.5% profit margin and contribution to reserves to meet solvency requirements. That is the return that we expected to receive on our premiums. As an actuary, you've calculated rates of return on premium before, haven't you? I guess I would just say actual contribution to reserves versus projected. Yes. Are you telling the board that a contribution to reserves is the same thing as return on premium? The way that you defined return on premium, it seems consistent to me. How would you define return on premium? The expected excess of profit margin or operating income is the way that I would hear it. It's the percentage of premium that we expect to be returned to the organization for solvency purposes. The percentage of premium you expect to return for solvency purposes, but that's not the total return on premium, is it? Well, one is actual and one is projected. I think that's the nuance that we're getting at. When you select a value for a component of the rate filing, are there actuarial standards which tell you how to go about selecting that value? There's data, there's guidance on how do you data quality and at the end of the day, the key is that you're supposed to make assumptions that are projecting to future costs. So you take your historical data, you use the data available to you and that is how you arrive at your projected assumption. And so are there actuarial standards that tell you how to arrive at a particular value based on the data that you review? It's not prescribed as long as you are using reasonable and appropriate assumptions to the best of my knowledge. Okay, so there's not there's rarely of ever one single correct answer, right? There are generally anything, any future event that you're trying to predict, not just as an actuary, there's a range of potential outcomes and we try to come up with our best estimate and we try to understand how wide of a range of potential outcomes there could be in those estimates. Could you please turn to exhibit 15? And Mr. Lombardo, I'll do my best not to switch back and forth between different exhibits. I'm going to have to do it once or twice, but in general, I'll focus on a particular exhibit. Okay, I appreciate that. Thank you. Are you there on exit 15? Exit. Exit 15. Yeah, the MVP response to the Green Mountain Care Board's first set of memorial questions. Very good. Could you turn to page 004 of that exhibit? Okay. Okay, and could you go down to row seven where it says preliminary medical loss ratio MLR, you see that? Yes. Okay, and then could you read the number in column one under the heading individual? 1.056. Okay, and what does that 1.056 mean? It means that for every dollar of premium that we collected in the individual New York market, we spent 105.6% of that on claims. Okay. And now could you turn to page 010 of that exhibit and look down again on row seven and read the number in the column one. 0.893. 0.893. Okay, and what does that number signify? That states that in the state of Vermont for every dollar of premium collected in the individual market, we spent 89.3% of that dollar, 89.3 cents for every dollar premium on claim expense. Okay, so would you agree with me then that taking those two numbers together indicates that New Yorkers got about 16 cents more back on their premium dollar than Vermonters in 2020, correct? We were very underpriced and unintentionally in New York and we've made corrections for that. When we set our rates, we set our rates based on the block of business to stand alone on its own. We're not trying to cross the two populations together. Again, we had very unexpected adverse experience in our New York block in 2020. I don't question that. I just want to make sure that the board understands and that I understand what these numbers signify. They do signify, don't they, that in 2020 New Yorkers got 16 cents more back on their premium dollar than Vermonters did, correct? MVP spent 16 cents approximately more on claims in New York than we did for every premium dollar in New York individual than we did on Vermont individual. Okay, and you said in New York you were going to make corrections on that. Obviously, you can't make money if you spend more than a dollar for each dollar you take in. How are you going to correct that? Through an adjusted rate increase making adjustments to our rates. Okay, and in New York you're aware, aren't you, that MVP has asked for approximately a 17% rate increase in the individual market. Yes. Okay, and MVP also has asked for a 17% increase in the Vermont market, even though MVP only gave Vermonters 89 cents back on the dollar and gave New Yorkers a dollar back on the dollar, correct? Yeah, but that's ignoring changes to our product mix that we're offering in New York as well as items that we're doing to address that adverse experience. So, and it's also ignoring 2021 rate changes. 2021 rate changes, we're not working off of 2020 data to derive at a rate increase working off of 2021 rating premium rates. Could you turn to exhibit one, please? Okay. Okay, and you see the third paragraph down beginning per ASAP number 26? I'm sorry, which page? I'm on it. Good point, page 11. Page three of the document page 11 in the exhibit. Okay, I'm there. Okay, so you see that third paragraph that starts per ASAP number 26? Yes. Okay, and one of the requirements of ASAP 26 as stated there is that the premium rate must reflect investment income, correct? Yes. Okay, how, if at all, does your proposed rate for 2022 reflect investment income? We're not capturing that specific item, but as claims are trending at a higher rate than returning investments, even if our investments are going up a couple percent a year and claims are trending up at a higher rate, then that still will reduce your solvency as a percentage of total over the long run. That may well be, but you're not reflecting investment income in your rate filing, are you? Not explicitly, but our contribution to reserves is when our financial planning team comes up, when they do their forecasting and modeling, they are taking all that into consideration. That does help derive our 1.5 percent contribution to reserves. It's not explicit in the explicitly called out in the refiling, but it is factored in behind the scenes by our accounting and financial planning teams. What is your, what is an IDNR factor? It's a reserve, so suppose I go to the doctor today, July 19th, 2021, that claim may not be paid. It's not paid right on the day usually. There's a lag in the time that it takes to process claims. So the reserve or IDNR incurred but not reported is what that stands for. It's a claim that's incurred, but it hasn't yet been reported or yet paid. That's a known outstanding item that impacts our income statement. We have to hold a liability for that, which is audited by third party actuaries at your end. So they've got paid data and then the IDN is added to the paid data to result in incurred data, right? Claims that were incurred in 2019 with run out through, you know, early 2021 plus a small IDNR factor represent our incurred data. So if you'll go to the last paragraph on page 11, you'll see there that you talk about using in this case in this way filing a negative IDNR factor. How can an IDNR factor be negative? It's because if you go to the following page, there's a claim on the there's one line that has a 0.999 factor in there. And what's happening is we pulled data through a certain time period, but then because of the lag between when that time period existed and when the rate filing was due, we made adjustments as needed because we had more relevant information. So we have our incurred estimate for the 2019 experience period, which is about a month later than with the paid through date that our claims represented. So if I'm looking at that table, I'm looking at the incurred claims. So we're making an adjustment to represent our best estimate of our incurred claims for 2019 at that time. But isn't the purpose of an IDNR factor to estimate how much more is ultimately going to be paid than your paid data shows? Usually we use data with two to three months of run out, which results in an IDNR factor of three percentage points, given a range around that. We're using 2019 data, which at this point had 14 months of run out in it. So almost all the claims have been paid. So that one reversal claim that we found out about in the month after we pulled our data, that's resulting in a reduction to the IDNR factor. So it would have been a 1.0 IDNR factor, but we chose to pass through the best estimate of what our incurred claims were at the time of the filing, which resulted in a slight reduction. So the paid data you're using here to which the IDNR factor is applied is 14 months of 2019 data. It's 2019 data and then it's run out through February of 2021, which is 14 months. That's the paid claims and then the estimate represents as of March 2021. Usually in a normal year where there isn't COVID we use the most recent calendar year of data and then you only have two months or three months of run out. So you have to add 12 months to that. Okay, so if you were using 2020 data you would expect that the IDNR factor would be positive. Yes. Could you turn please to page 13 of the exhibit one. Okay, I'm there. Okay, and the bottom paragraph line 18 adjustment for COVID-19 booster shots to see that. Yes. Okay, and we discussed earlier the different views on whether or not there's a booster shot will be needed and I'm not going to go through any of that with you again. But you estimate your cost of a COVID booster shot by looking at the cost of a flu booster shot, correct? That's correct. And my question is why don't you estimate the cost of a COVID shot by looking at other by looking at how much you're paid for COVID what the cost applies to MVP of a COVID shot. So the federal government has so essentially a two cycle dose of the COVID booster shots of Pfizer, Moderna in this case is approximately $45. It's $22 and I believe 48 cents per dose. So what's happening though, what we didn't know at the time when we were setting our rates last year was how much the government was going to subsidize the purchasing of those vaccines. The $45 represents the cost of administering the shot. It's not actually the ingredient cost. If you think about it, there's two components to a vaccine cost. It's the cost of the actual vaccine itself and then it's the cost of the administration, the pharmacist, the nurse, whoever it may be administering that vaccine. We don't know what the future holds in terms of funding from the federal government for COVID booster shots. At some point we would expect that to run out and that's what we're explicitly assuming in our data. Okay. So last year the federal government assumed the cost of a COVID shot. Is that correct? The ingredient cost, not the administrative cost of it. And that's not what you assumed in last year's rate filing. Last year's rate filing, we relied on a national consulting firm weekly. They did a study and the COVID vaccine would be the cost of Tamiflu, which we found was approximately $75 per dose. And that's the assumption that you included in your rate filing of last year, correct? That's correct. But you also made, didn't you, one terrific assumption that turned out to be right, that I couldn't be happier about and I believe everybody on this call couldn't be happier about it. I mean, it was approved and people are utilizing it. So yeah, I mean, I'm happy about that. So if that's what you're implying, yes. Yes, I am. I'm implying that we all get some things right and some things wrong and you got that right and I was skeptical and I'm so happy that you were right and I was wrong. Thank you. Could you please turn to, this is the one time I'm going to go to exhibit four and turn to page 004 on that exhibit. Okay, I'm there. Okay, and that's the same table that you were talking about earlier with counsel, wasn't it? Yeah, that is, that's the table that Elleny placed into their opinion. Okay, and I just want to make sure that I understand the numbers and that the board understands starting from the date that's farthest back. Between 2015 and 2016, your projection, your expected was just about on the money, right? Just about two tens of percent difference. That's correct. Okay, but then for the next year you, your projection, the actual was less than half what you expected, correct? Correct. And then in the for the next year, 2017 to 2018, again, the actual was less than half of what you expected, correct? Correct. Okay, and then for 2018 to 2019, the actual was what was approximately one third of what you expected, correct? Yep, just more than one third. And on the other hand for 2019 to 2020 the actual was more than three times what you expected, correct? That's correct. Okay, so when you have data like this that obviously varies quite a bit and the differences vary quite a bit. There are various actual actuarial techniques you can use to arrive at a defensible assumption as to what trend would be in the next year, correct? It's challenging because of risk adjustment which is what we reference in the paragraph above especially given our growth and market share over that time period. Okay, well, would it be reasonable to use the most recent year, the 21.7%? If that is expected to persist, then yes especially because that does represent our membership as of, you know, it's the closest approximation for our membership that we have today. So then are you telling the board you expect that 21.7% to persist? In 2021 in 2022 we expect something more around the range of 12% Okay, so would it be reasonable then to use an average of the last two years as the assumption as the assumed pharmacy trend in the rate filing? No, as I referenced earlier I think if anything should be used for this actual to expected comparison it should be based on a population that's most similar to the population that was used to derive the expected. Sorry, go ahead. Which would be an active population whose active in both time periods? I should have been clearer. I'm not asking you about now the difference between the expected and the actual. What I'm asking is when you've got five numbers there in the actual column, just look at the actual column that vary between 2.5 and 21.7 just looking at those numbers there are various ways that are actually defensible aren't there to arrive at an assumption based on those five numbers. I would say using the actual population or if you somehow figured out a way to normalize the results for pharmacy risk adjustment that those would both be reasonable techniques not making an adjustment for population changes I don't think is reasonable. So are you saying then that we shouldn't look at the numbers in the actual column in order to come up with an assumption for pharmacy trend in this year's filing? I think I guess what I'm saying is we should include we should respect our PBM who understands their opinion which is it's accounting for projected new drugs hitting the pipeline they have their finger on the pulse of potential FDA changes to indications and expansions of indications so it's basically utilizing it's relying on the subject matter expert to some extent for this information and it's projecting future costs not necessarily looking historically at the past so looking at the past could skew our results especially given how wide of a range we've seen given our population changes. If Elody wants to use a three-year average or someone else wants to use a five-year average to arrive at the estimate for pharmacy trend for this year's filing are you saying that's unreasonable? If it's not accounting for changes in population yes. Okay, do you have other numbers than those that are in the expected column that do account for changes in population? I believe that we did a calculation in one of these exhibits of actual to actual. I don't know the exact exhibit number offhand. Okay, and I don't want to take a whole lot of your time but if you can locate that quickly please do if you know that we take a long time to locate that I don't want to waste either your time or the board's time. Me try to use some technology available and see if I can find it quickly. If not then I will not. I don't think it would be a great use of our time but we could follow up if needed. Very good. There are a lot of exhibits no one can keep track of them all. Would you mind going back to exhibit one I'm finished with exhibit four and again go back to page 14 of exhibit one. Okay. And you see in the middle of page medical trend factors that heading. Yes. Okay, and in the second paragraph you state there that the total allowed unit cost trend is three and a half for 2020 5.1 for 2021 you see that. Yes. Why such a big and then 5.7 for 2022 why such a big difference between the 3.5 trend for 2020 and the 5.1 for 2021. The approved possible budgets in 2020 were lower on average that was a big driver the 2021 approve possible budgets included some sort of an increase for for covid to to help support hospitals this is outside I'm sorry to venture outside of really my expertise but that's my understanding. I'm sorry could you go over that again to the extent that you do the expertise. Yeah. There's three different kinds of trends that we have that we're managing to for medical trends. One is MVPs direct contracting efforts with providers and hospitals that's in New York some providers in Vermont and then we have a third party carrier that we rent their network for national access to providers in case you're on vacation or something like that. And then the third aspect of medical trend is the Green Mountain Care Board under the Green Mountain Care Board's jurisdiction. So in 2020 there was a lower trend approved by the board because 2021 had an adjustment for covid to help support the hospitals because they have lower utilization and help support them. But again that's my understanding I don't want to step on toes I'm starting to venture outside of my area of expertise. Very good can you go to the next paragraph you see starting with the MVP analyzed historical medical utilization trends you see that. Yes. So for utilization trend you adopted a positive one percent right and that was originally recommended by MVP in connection with your rate filing of a couple years ago I think the 2019 rate filing do you remember that? This is that we're actually adopting L&E's recommendation from the 2019 or 2020 rate file. Sorry Mr. Lombard I guess I misspoke did I say MVPs I meant to say you adopted L&E's recommendation correct? Correct. And when L&E initially recommended that one percent your own data showed zero percent right? Yes but it's worth noting that our population again it's our population changes over time. Our risk adjustment as a percentage of premium was increasing as we were acquiring more business and gaining market share it's kind of flattened off with the first few years we are attracting the healthiest risk. Those members utilize fewer services then we're paying back for that in risk adjustment, increased risk adjustment amounts. I hate to ask you to go back to exhibit 4 again after suggesting that I wasn't going to do it anymore but I would like you to go to exhibit 4 and go to page 01014. Okay. Okay and you see under the line three year trends there that's a utilization trend right? That's correct. Okay and so can you explain and what data did you use to what was the data you used on which this line here these three year trends from the 5% out to the 95% are based? We use historical data excluding you know stopping in February of 2020 because then the data and the utilization was skewed due to COVID. Okay and if you remember so you use three year trend this is based on a three year trend correct? That's correct we're using 2019 data so we are projecting to 2022. Okay and you remember last year you only used a two year trend correct? Correct because we used 2019 data again. Okay and that data showed a lower range of trends didn't it? I would have to go back. I would have to go back. Why don't you go back then and turn to exhibit B page 17? Exhibit B is in the very back of your binder. Okay. Are you there? Take the time I know it's a nuisance. I shut down my outlook earlier because I was getting notifications I want to be able to focus so it's just taking me a minute. I am no one to criticize anyone for not being able to pull something up on the computer. If you can't I can just describe it to you and I think you can give me a I'm getting there right now so was this one actually printed out? Okay. Exhibit A or exhibit B? Exhibit B is in page 17. Okay. Okay and so you see that on page 17 you're using a two year trend and there are the 50th percentile and negative six 100th of a point right? Yes. Okay and then you're using a three year trend in this year's filing which produces a trend that's a little bit higher. My question is first question is why did you use a two year trend last year and a three year trend this year? Last year we use 20 they're both using 2019 data one is projected to 2021 and one is projected to 2022 or sorry yeah last year we projected 2019 to 2021 now we're projecting 2019 to 2022. Back on exhibit 1 could you turn please to page 15? You're there? Good. Down at the bottom of the page you see the subhead paid claim surcharges and so forth. Correct. Okay. The last line of that paragraph refers to a surcharge levied by the state of Massachusetts. Do you see that? Yes. Do you see a surcharge levied by the state of Massachusetts for members enrolled in a Vermont plan utilizing those services. It's not for we don't operate in Massachusetts but we do participate with providers and hospitals in the state of Massachusetts so if someone purchases a Vermont in a Vermont enrolled COPE plan goes to Massachusetts the state of Vermont applies a charge on the claims to account for those services just like a little tax that they charge us. And why is it why should it be paid solely by Vermonters rather than rather than by all MVP insurers? It's we're setting our rates based on the data presented in front of us. Excuse me. And the data presented in front of us in this case is Vermont small group and Vermont individual data. Vermont members are utilizing those services in Massachusetts so we're passing on that cost into the Vermont premium rates otherwise it wouldn't be actually sound. Do you do the same thing for New York residents who use services in Massachusetts? Yeah if it's a cost that's levied on us we may not call it out specifically but we do include it. Okay could you turn now to page 17 of exhibit 1? Okay. Okay and down near the bottom of the page you see the subhead in italics contribution to reserves risk charge you see that? Yes. Okay and you talked there about statutory reserve requirements for MVP's Vermont block of business do you see that? Yep. Okay. MVP's surplus excuse me on its annual statement is indivisible isn't it? You don't have certain surplus designated for New York business and other surplus for Vermont business do you? No. That's that's outside of my domain I would have to defer to our accounting team who prepares the income statements in the balance sheet. You don't know you think maybe that there are that there may be separate requirements for Vermont attributable surplus and on the other hand other requirements for New York attributable surplus. Objection sustained. Are you familiar with MVP's annual statement? I'm familiar with it I don't know what inside and out. I'm sorry you don't know what? I don't know what inside and out but I'm familiar with just on a high level a couple of the exhibits I know but I don't know every single exhibit that's included. Okay. When you talk about statutory reserve requirements for MVP's Vermont block of business what are you referring to? It is there's a couple of different ways you can measure solvency. One is RBC another is as a percentage of premium New York state who is the regulatory body for where we're domiciled they view our reserve requirements as a percentage of premium essentially if you fall below a certain percentage of premium then you're at risk of not being able to pay claims and causing market instability so there's concern that if your solvency is too low then you need to somehow find a way to add to your balance sheet. If you're too high then then the questions may come from the regulatory body of what do you plan on doing with those reserves how are your reserves changing over time and how do you do that analysis? New York state doesn't require you does it to set aside a certain amount of surplus for Vermont business. That would be a question that I would have that we would have to ask the Department of Financial Services I think they view our legal entities in whole to ensure that we can provide market stability and we don't go on solving. Could you turn to do you say 54? 54, 05, 4. Okay, I'm there. Okay and that's headed pricing trend assumptions right? Yes. Okay and so the 1% utilization trend there we already talked about what let me ask you about the unit cost trend can you tell me why there's such a big difference between the unit cost for inpatient and outpatient on the one hand and for physician and other on the other hand? Yeah, I mean other is included in there so to address that first we we change the way that we're bucketing our claims to eliminate the other category but we kept in there to be consistent with prior years in the future we can remove that in general though inpatient outpatient trend at higher rates than physician trends that's something that I think there's more overhead costs so they generally have to increase at a higher rate and there's more more services being performed and technology at a facility than there is at a provider's office so generally speaking facility trends do exceed physician trends as far as you know is it typical for physician for facility trends to be four times the physician trend? That's not totally out of the realm of reasonability I mean that is generally we see that physician trends are a couple of percent and facility trends are in somewhere in the four to seven percent range on average. Could you turn please to page 56 of exhibit one? Okay okay and what you to try to do is to explain to the extent you can in common sense terms the difference between the number on line 14 the number on line 29 and the number on line 31. Line 14 is our 2019 data adjusted for for high cost claimants what we do is high cost claims there's a variation around high cost claims tail basically mathematically tail expectation it's hard to predict there's a high variance around it so rather than I want to make sure that I'm on the right page this is the one entitled development of index PMPM claim rate yep I'm just trying to explain how we get to line 14 but if you want me to bypass that basically 2019 data with some adjustments to the actual 2019 claim year let me ask you a better question there are three different numbers each of which differs by about 100 bucks on line 14 there's the 409 70 on line 29 there's 514 in change and on line 31 there's the 608 in change and so if you can could you just explain in common sense terms how the 409 becomes 514 and then explain how the 514 becomes 608 the 409 we have to we make a couple of adjustments for new benefits or benefit changes that are going to occur between 2019 our experience period and 2022 and then we apply medical conditions to the end as well as non-system claim expenses which are in lines 27 and 28 that gets us to that 514 99 and line 29 the next adjustment is for the federal risk adjustment program we're paying into risk adjustment well that's basically saying is MVP's individual population is healthier than our competitors and as a result we have to pay into risk adjustment in the playing field as I was talking about earlier okay I get the 514 to the 608 let me just ask you for a little more detail about going from the 414 to the 514 you're saying that much of that is due to trend to go from the 414 to the 503 in line 26 it's all that's the impact of 3 years of trend and then we have that's trend so go from the 414 to the 503 that's all trend yes okay is there a rule of thumb as to how much a point of trend is worth as a part of in a rate increase that is can you translate a point of trend into a dollar amount of the rate increase okay I mean I would the easiest thing to do would be to look at line 31 where a paid index rate is and then you know there's some non claim expense items but a ballpark estimate would be 1% of that figure with a little bit of an adjustment from there very good could you turn to page 58 of that same exhibit okay okay and then you see on the bottom percent of paid claim taxes and assessments you see that yes okay I see the Vermont paid claim surcharge but under that I see a New York state hcra surcharge what is that it's very similar to that Massachusetts that we talked about that in the prior section probably about 10 minutes ago it's there's if a Vermont member utilizes services at a New York hospital there's an additional tax that's added to that claim which is then you know that's what's being reflected online okay so you're saying you have no choice but to include that assessment as part of the rate filing yeah we have to pay that every year on our claims for Vermont members utilizing New York facilities okay could you turn to page 59 the next page okay okay on line 6 you see the annual trend factor there of 1.014 did I say did I say page 6 on line 6 annual trend factor yep 1.014 yep okay why is that trend so much lower than the trends that you showed on the proceeding pages I'd have to go back to the memorandum but it's only trending a component of those amounts where if I recall it's only trending amounts that are subject to the deductible I'd have to go back to our memo just to confirm that or one of the exhibits but it's a subset of our full trend we don't have to trend you know if it's a copay that's being used we don't have to apply so what the CSR is trying to do is cover the reductions to cost that a member is you know so if I'm in a CSR plan the base silver plan may have a $50 copay but if I'm in the CSR plan and maybe a $10 copay that $40 of copay costs is what's captured in the data here in that case we wouldn't need to trend the copay amount if the benefit design isn't changing we'd only want to account for any kind of utilization trend so it's not we wouldn't have to worry about unit cost impacting those increases in that case okay could you turn please to exhibit 12 okay and turn to page 4 of exhibit 12 please okay you recall a little while ago where you were talking about IBNR factors right okay so this shows the IBNR factor by month for both small group and individual right yes for 2020 through 2024 and so as you see there they're mainly just a little above one for March 2021 more than a little above one but then for April 2021 you've got a factor there at 2.878 why is that so big that's just the way that claims complete I mean if you were to incur a claim right now in all likelihood it wouldn't be paid in the month of July that's what that's telling us and that's all based on the way we develop those completion factors or the IBNR factor is based on our historically does you know a given month complete so on average what we see is that you know April of 2021 the incurred estimate we would expect to increase by a factor of 2.878 because of you know a lot of claims just haven't been processed at this point especially higher cost claims and is it fair to say that the more recent the claim data is the more uncertain the ultimate is going to be that I would agree with that okay Mr. Lombardo have you looked at the blue cross rate filing I'm more familiar with just what how our competitive position will look based on proposed rates than anything else I know you know they made some they use 2020 data I know they have a favorable some favorable pharmacy assumptions beyond that though I haven't spent too much time focused on that do you know that the blue cross in the blue cross rate filing the blue cross actually has included a substantial factor in the rate filing for recoveries pursuant to the risk corridor program litigation I was not aware of that okay do you know what that litigation is risk corridor is based on 2014 through 2016 ACA compliant data and there was a mechanism available where if you either made more money than your target or lost more money than you expected then there was a sharing of those losses so that that is the risk corridor program and it was repealed under President Trump's administration to say because he said that he was looking out insurance companies basically if you're receiving money that meant that you underpriced your plans and you were losing money so I don't agree with his assessment that it was a bailout it was because the ACA was new and there were a lot of unknowns that were taking place and carrier it was hard to project costs I'm not characterizing anything as a bailout I'm just and you know don't you that the industry you guys won before the Supreme Court you're suing the federal government to get paid the Supreme Court said insurance companies you're right you will get paid correct but you haven't included anything for that in your rate file that was from 2014, 2015, and 2016 we're using 2019 data to set our rates including an adjustment for a time period that is way before when you set your rates for a period that that shouldn't be factored into your projected costs in the future it could be something that's behind the scenes impacting things but shouldn't be explicitly called out in my opinion so then what does what does MVP do with that risk card or money it was an addition to our reserves we can use it how we see fit I have no more questions thank you all right now we're going to move to questions from board members like I said like to start with member Yusuf I'm sure thank you Matt what is the impact of the price transparency rule whereby consumers can shop for lower price and how can MVP encourage people to shop for lower prices and thereby reduce their claims expenses yeah it's a good question as of right now there's a lot of question marks around how the transparency tool is going to roll out this is based on information that I've learned from our contracting team and just reading publications but it's a reasonable approximation for upfront comparisons it could produce misleading results which is kind of