Documents and timeline: Blue Cross Blue Shield NM rate hikes
In March 2010, Jody Neal-Post, an angry Blue Cross and Blue Shield of New Mexico (BCBSNM) health insurance policyholder and Albuquerque attorney, questioned the justification for her insurer’s newly-approved 25 percent rate hike, and sought a hearing in front of the state Superintendent of Insurance.
That seemingly simple act set in motion a heated debate that would lead to a Supreme Court case, denunciations of “back-room deals,” the resignations of three sequential insurance superintendents, and proposed legislation to strengthen the Public Regulation Commission (PRC)’s oversight of its semi-autonomous Insurance Division.
Along the way, journalists reported that two executives at BCBSNM’s Illinois-based parent company had taken home $24 million in bonuses in 2008 and that the Insurance Division had approved BCBSNM rate hikes every year between 2004 and 2009 — during which time the company’s cash reserves grew from $4.3 billion to $6.7 billion.
Here, Veritas NM presents a timeline of the debate, with links to relevant documents and news reports:
November 9, 2009 Blue Cross Blue Shield New Mexico (BCBSNM) files individual-market health insurance policy rate hikes with the state Division of Insurance, increasing 40,000 policyholders’ monthly premiums by an average 25 percent. Many policyholders face rate hikes of nearly 30 percent:
BlueDirect A policies 29.5 percent increase
BlueDirect B 29.5 percent
BlueDirect C 19.1 percent
BlueChoice Plus 23.1 percent
BlueChoice 20 21.6 percent
BlueChoice 30 10 percent
BlueEdge Individual HSA 29.5 percent
BlueEdge 100 29.5 percent
For most policies, Blue Cross’s analysis suggests even higher rate increases are warranted — for a total average increase of 37 percent, rather than the 25 percent sought. For BlueChoice 30 and Blue Transitions, 10 percent increases are sought even though the insurer’s analysis indicates only 3.5 percent and 8 percent increases, respectively, are warranted.
The Blue Cross rate filing identifies two policy types for which a rate reduction is warranted (Number One: -14 percent; Conversion: -17 percent) but the company seeks no change in those rates.
Nov. 16, 2009 Division Actuarial Assistant Arunod Kumar sends a letter to BCBSNM actuary Kevin Carr stating that a statistical calculation based on historical data justifies a rate hike of only 18 percent.
Nov. 18, 2009 Carr asks that Kumar provide his calculations supporting the proposed 18 percent increase. No analysis or calculations were provided. (Division actuary Thomas Bowling subsequently testified, “we often throw out a number in the hopes of compromising and getting the rates lower for consumers, and that’s what he [Kumar] was doing.”)
Dec. 8, 2009 Division staff approves the BCBSNM rate increases. They are set to take effect April 1, 2010.
March 5, 2010 Albuquerque attorney and policyholder Jody Neal-Post contests the BCBSNM rate hikes and requests a Division hearing.
March 9, 2010 Then-state Superintendent of Insurance Morris “Mo” Chavez suspends staff approval for the rate hikes and orders a public hearing for April 26, 2010.
March 11, 2010 BCBSNM files an unsuccessful motion to reverse Chavez’s suspension of the rate hike.
March 17-18, 2010 N.M. Attorney General’s office files a motion to join the case.
March 26, 2010 BCBSNM files a motion objecting to Neal-Post’s involvement in the case.
April 2, 2010 AG’s expert witness, actuary Allan I. Schwartz, submits pre-filed testimony questioning the completeness of the BCBSNM rate filing and justification for the requested rate hikes.
April 7, 2010 Division staff file Notice of Errata and corrections of several apparent typos in Division staff’s pre-filed testimony.
April 8, 2010 BCBSNM files an unopposed motion to prevent public disclosure of confidential company finances disclosed during discovery.
April 9, 2010 Superintendent Chavez denies BCBSNM motion to exclude Neal-Post as an intervener in the case.
April 12, 2010 Superintendent Chavez grants AG’s motion to join the rate case.
April 23, 2010 The Friday or weekend before the scheduled Monday public hearing, BCBSNM, Neal-Post, Division staff, and the Attorney General’s office agree to a settlement reducing the 25 percent average rate hikes to an average of 21 percent.
April 26, 2010 Superintendent Chavez announces the settlement to dismayed policyholders, primarily small business owners, who had traveled from across the state to comment on how the rate hikes would affect them. Public Regulation Commission (PRC) commissioner Jason Marks of Albuquerque denounces the pre-public hearing settlement agreement as a “back-room deal.” Chavez signs a final order approving the settlement.
May 3, 2010 The New Mexico Independent seeks comments from PRC officials for a news story planned for the following day, that will reveal the state Division of Insurance has approved large BCBSNM rate hikes every year since 2004.
May 4, 2010 Superintendent Chavez resigns. Deputy Superintendent Tom Rushton takes his place. The New Mexico Independent reports that some BCBSNM policyholders have seen premiums increase by more than 150 percent since 2004, and that 2009 alone saw rate increases for some policies as high as 24 percent. The company’s NM Major Medical policies saw a 2009 rate increase of 24.7 percent and Number One policy rates increased 22 percent in 2009.
May 7, 2010 The New Mexico Independent reports that BCBSNM parent company Health Care Services Corporation paid its CEO $9 million in bonus pay in 2008, and that another executive took home $15 million that year.
May 13, 2010 Public Regulation Commission (PRC) votes to ask interim insurance superintendent Rushton to vacate Chavez’s approval of the 21 percent rate hike settlement agreement, which Rushton had helped negotiate.
May 14, 2010 Rushton resigns without vacating Chavez’s order.
May 20, 2010 Then-PRC Chair David King’s executive assistant, Craig Dunbar, is appointed interim insurance superintendent.
May 25, 2010 King writes a letter to interim superintendent Dunbar, asking him to set aside Chavez’s April 26, 2010 final order approving the rate hikes.
June 1, 2010 The New Mexico Independent makes inquiries with PRC officials regarding Dunbar’s residential history and eligibility to serve as insurance superintendent under state law, which requires candidates have lived in the state for at least three years.
June 10, 2010 Dunbar is asked to resign after Division attorneys conclude he does not meet state residency requirements for the superintendent position. He is appointed Deputy Superintendent of Insurance – a position with no residency requirement.
June 10, 2010 Interim chief of staff Johnny Montoya (husband to Chairman King’s cousin and state Rep. Rhonda King) is appointed interim insurance superintendent.
June 23, 2010 Interim superintendent Montoya suspends Chavez’s final approval of the rate hikes to allow for a new public hearing on Aug. 25, 2010 – but orders that rate hikes averaging 21 percent be allowed to go into effect and that, should the rate hikes approval be reversed after the Aug. 25 hearing, no refunds or rebates be given to policyholders.
June 28, 2010 BCBSNM petitions the N.M. Supreme Court to reverse Montoya’s order and to halt the scheduled Aug. 25 public hearing.
July 23, 2010 The New Mexico Independent reports that BCBSNM parent company Health Care Services Corporation cash reserves grew from $4.3 billion in 2005 to $6.7 billion in 2009 while BCBSNM filed double-digit rate hikes on individual-market health insurance policyholders.
July 28, 2010 Supreme Court rejects Blue Cross Blue Shield NM bid to stop Aug. 25 rate hearing.
Aug. 19, 2010 Montoya appoints Alan Seeley as hearing officer for the Aug. 25 hearing.
Aug. 23, 2010 John Franchini, an insurance industry executive, is appointed state Superintendent of Insurance. He is New Mexico’s fifth insurance superintendent in four months.
Aug. 25, 2010 BCBSNM officials show up to the public hearing with a team of plain-clothes bodyguards, departing immediately after expert testimony concludes – before angry policyholders are able to offer comment. During the public comment period, Superintendent Franchini urges policyholders to “trust” BCBSNM and regulators. Several policyholders report paying more than a third of their household income to BCBSNM for their monthly premiums, and complain deductibles have increased alongside premiums over recent years.
Sept. 3, 2010 The New Mexico Independent reports that Division actuary Thomas Bowling acknowledged a staff typo had been cited as support for the BCBSNM rate hike.
Sept. 24, 2010 The New Mexico Independent publishes a confidential audit of the Insurance Division by the National Association of Insurance Commissioners (NAIC), slamming the Division for inadequate oversight of industry, inadequate staffing and staffers’ “marginally sufficient experience.” A short-lived hunt for staff “leaks” ensues and Superintendent Franchini seeks closed executive-session meetings and then one-on-one meetings with PRC commissioners in a bid to avoid public discussion of its contents.
Oct. 2010 The Legislative Government Restructuring Task Force drafts a constitutional amendment to abolish the PRC.
Nov. 17, 2010 The New Mexico Independent lays off its reporting and editorial staff.
Jan. 20, 2011 State Sen. Dede Feldman (D-Albuquerque) introduces SB 208, the “Health Insurance Rate Increase Review” bill. The law would require the Insurance Division to post all health insurance rate hike requests on the web, public hearings and public comment periods, and would allow policyholders to appeal rate hikes to the PRC. (Currently, their only recourse is to file suit in district court.)
Feb. 4, 2011 Former New Mexico Independent reporters at Veritas NM file a public records request for Insurance Division hearing officer Alan Seeley’s “staff recommended decision” report that concludes Superintendent Franchini should affirm and leave in place the BCBSNM rate hikes. Seeley and Franchini refuse to disclose the report, citing its draft status. (But the state Inspection of Public Records Act, IPRA, contains no exemption for draft records.)
Feb. 15, 2011 Sen. Mary Kay Papen (D-Las Cruces) introduces SB 499, the “Health Insurance Appeals” reform bill to increase transparency and public involvement in the Insurance Division’s rate-hike approval process. It is later combined with Feldman’s SB 208.
March 1, 2011 PRC commissioners unanimously vote to direct Superintendent Franchini to disclose the draft report to Veritas NM. A copy is subsequently provided to the Albuquerque Journal, which reports the rate hike is “on track.”
March 12, 2011 Sen. Feldman’s SB 208, now combined with Sen. Papen’s SB 499, passes the state Senate 35-2.
March 16, 2011 Veritas NM reports that Seeley’s report questions the quality and thoroughness of the Division of Insurance’s review of the BCBSNM rate hikes, but recommends Franchini leave the hikes in effect. Franchini’s final decision to affirm or reverse the hikes was expected in early October 2010. No explanation is offered for the delay in issuing his final order.