I am writing today to announce the closure of the New Mexico Independent. After three and a half years of operation in New Mexico, the board of the American Independent News Network, has decided to shift publication of its news…
Posts Tagged Blue Cross
Gov. Susana Martinez signed legislation Monday that will strengthen regulatory power by the state on health insurance premium increases. The legislation is in response to large increases requested last year by Blue Cross Blue Shield of New Mexico that were recently affirmed by the New Mexico Superintendent of Insurance.
Sharp divisions surfaced on renewable energy and insurance rate regulation between Public Regulation Commission (PRC) candidates at an industry-sponsored candidates’ forum Wednesday, with District 4 Republican candidate Gary Montoya defending the use of coal-burning power plants while his opponent, Democrat Theresa Becenti-Aguilar, advocated more use of solar power.
Stephanie DuBois has worked as a dog trainer, bookkeeper and waitress, and managed the Deming Chamber of Commerce for three years. Outgoing Land Commissioner Pat Lyons is a former legislator who has overseen the state Land Office for the past eight years. The two are competing for a seat on New Mexico’s most powerful regulatory agency, the Public Regulation Commission. And each has a different vision on how the agency should be run.
Auditors for a national accrediting organization reviewing the New Mexico Division of Insurance this spring found an inexperienced, marginally trained staff often incapable of performing in-depth analysis of insurance filings, according to a June 24 draft report obtained by The Independent.
The auditors from the National Association of Insurance Commissioners (NAIC) also were sharply critical of how New Mexico regulators have overseen the insurance industry, the report shows.
The findings resulted from visits NAIC auditors paid to the New Mexico insurance division this spring as part of a regular every-five-year re-accreditation process for state insurance regulation agencies.
New Mexico’s insurance division won accreditation in August, but auditors placed the division on “probationary status” pending completion of a corrective action plan to address problems identified during their visits to Santa Fe, Superintendent of Insurance John Franchini acknowledged Thursday.
According to the report obtained by The Independent, auditors found:
- The division’s Financial Examinations Bureau is understaffed.
- The division’s financial analysis staff has “marginally sufficient experience” for financial analyses and require more training on insurance operations, reserves, accounting principles and other areas. “The current analysis staff are only marginally qualified to perform the duties assigned,” the report states. “Because of this, it is extremely important that the new analysts have sufficient background and knowledge in the areas of financial analysis and insurance accounting.”
- Review of staff analyses “did not appear to be in-depth and challenging in nature” and staff analyses contained “numerous deficiencies.” (The Independent reported earlier this month that one staff figure cited as support for a Blue Cross Blue Shield health insurance rate hike was actually a typo.)
- There is “no evidence” of division review of insurance companies’ submissions of figures and documents in response to division inquiries.
- “Considerable confusion” exists at the division regarding the formal system for prioritizing insurance company examinations, and the system has therefore apparently been “ignored” in scheduling reviews of insurance company filings.
- The division appears to have failed to share information on insurance companies with other states’ regulators.
The auditors also noted that the division’s financial analysts frequently resorted to surface-level reporting without analyzing underlying factors, when reviewing insurance filings. Their reports frequently identified what happened, but not why, the report states.
The division’s financial surveillance staff suffered significant turnover during the past two years, the NAIC auditors also noted.
The auditors recommended the division provide ongoing training to its financial analysts in, among other things, insurance operations, reinsurance, reserves and other areas to bulk up their expertise in reviewing insurance company filings.
Finding echoes earlier warning
The NAIC’s finding that Division reviews of documents submitted by insurance companies are insufficient appears consistent with similar assessments by an independent insurance rates expert hired by the state Attorney General’s office to review a controversial Blue Cross Blue Shield N.M. rate hike earlier this year.
The draft report did not focus just on insufficiencies, although that appears to have dominated the report. NAIC auditors noted areas of improvement at the division.
The division’s new chief examiner, hired in 2009, had provided “significant oversight,” auditors found. But financial examinations of insurance companies conducted by division contractors prior to the new chief examiner’s arrival frequently contained “no evidence of any involvement by division personnel on the examination.”
Commission might review report in secret
The Public Regulation Commission (PRC), which oversees the insurance division, had scheduled Franchini to present the corrective action plan to commissioners Tuesday. But that presentation was rescheduled for Thursday.
Division officials had learned Tuesday morning that The Independent had obtained a copy of the NAIC report.
At Thursday morning’s public Commission meeting, Franchini asked commissioners for a second delay, saying the corrective action plan would be ready next week. He also suggested the PRC allow him to present the NAIC auditors’ findings and the division’s response in a secret, closed-session meeting, alluding to sensitive personnel matters supposedly discussed in the reports.
But the June 24 version of the NAIC report obtained by The Independent doesn’t name any employees or even specify division staff positions, other than to compliment the division’s chief examiner for improving oversight issues.
“The law is clear,” N.M. Foundation for Open Government director Sarah Welsh told The Independent Thursday. “They can only go behind closed doors to discuss personnel actions, complaints or charges ‘against any individual public employee.’ That means actual people, with names. If they’re discussing some larger departmental issue and they realize they need to fire the department head, fine, they can go talk about that in closed session. But they should specify which limited personnel matter they’re talking about, whether it’s hiring, demotion, dismissal or the investigation of specific charges against a specific person.”
“It’s already been on the agenda (for Tuesday), and has to be discussed publicly,” Becenti-Aguilar said. “This is our new way of open communication and transparency.”
Becenti-Aguilar and PRC Chief of Staff Michael Rivera both took Franchini to task for failing to communicate with commissioners and for delays in the division’s preparation of the corrective action plan, which was originally due this week.
“When we have a deadline from an oversight agency like this, we need to make much effort to meet those deadlines,” said Rivera. “It has been about three weeks since we received notification (from NAIC) and we’ve asked (the NAIC) for an additional week to respond. Mr. Franchini has assured me we will get this done. Part of the reason for the delay was I found out the commissioners were unaware of the situation.”
‘No attempt to hide anything’
Franchini said he had not intentionally kept the audit findings from commissioners.
“There was never an attempt to hide anything – that wasn’t my intent,” Franchini told commissioners. “I’m new at this stuff, just getting my feet wet. But we almost have that plan complete. We’d like to present that to you at a closed hearing. We can do that early next week.”
Commissioners expressed concern to The Independent in July regarding Franchini’s ability to lead the Division. But only Marks voted against Franchini’s appointment.
Jones suggested staffers should have stayed in Santa Fe to continue preparing the corrective action plan rather than take an August trip to the NAIC annual meeting in Seattle, Washington.
“Maybe they shouldn’t have gone to Seattle,” Jones said.
But the purpose of the Seattle trip was for division employees to seek re-accreditation before the NAIC Financial Regulation Standards and Accreditation Committee, staff have said.
Jones acknowledged that he had had the opportunity to read the NAIC report, but had not done so.
“I was offered a copy and said I didn’t want it,” Jones said. He did not elaborate.
The Independent filed a public records request Aug. 17 to inspect all division correspondence with the NAIC. However, the Division has not yet disclosed the final NAIC report and probationary status notice letter, or other related documents.
Asked if the Division’s probationary status was unusual, Franchini could name no other states currently on probation with the NAIC. But two other states, Nevada and New York, had been through the probationary process in recent years, Franchini said.
In the New York case, the problems had to do with insurance regulators’ statutory power, rather than under-staffing or lax oversight, Franchini acknowledged.
NAIC officials could not be reached for comment Thursday.
New Mexico Independent’s previous reporting on this issue:
Former Republican state legislator Ben Hall and former Democratic Doña Ana County commissioner Bill McCamley both want to clean up the powerful and scandal-plagued state Public Regulation Commission. The men, who are fighting over outgoing Commissioner Sandy Jones’s District 5 seat, both told The Independent they want to see increased PRC scrutiny of utility and insurance companies’ rate hikes, and increased accountability at the PRC’s semi-autonomous Division of Insurance. But the candidates differed on how they would achieve those goals.
Blue Cross and Blue Shield of New Mexico attorney Paul Bardacke spent much of his time at last week’s Division of Insurance hearing on his client’s latest health insurance rate hike attacking Allan Schwartz, the Attorney General’s office’s independent expert who testified…
A contentious all-day hearing Wednesday left many Blue Cross and Blue Shield of New Mexico customers saying they see little hope for relief from a controversial 21.3 percent increase in their health insurance premiums. Even though the company’s cash reserves have now reached $7.2 billion, an expert witness for the Attorney General’s office’s, who reiterated earlier testimony that Blue Cross had not sufficiently documented its claimed cost figures, and whose analysis found the insurer’s rate filing had exaggerated company losses, said the 21 percent increase was “reasonable, given the circumstances.”
Controversy has surrounded the state’s approval of a 21.3 percent rate hike on 40,000 Blue Cross and Blue Shield of New Mexico health insurance policyholders, but the state Division of Insurance approved Presbyterian Insurance Company’s even larger, 24 percent health…
The state’s new Superintendent of Insurance, John Franchini, began work Monday — just two days ahead of a public hearing scheduled for Wednesday on the controversial Blue Cross and Blue Shield of New Mexico health…
In light of public outrage over a controversial 21 percent increase in Blue Cross Blue Shield’s health insurance premiums — and revelations the increase may have been based partly on exaggerated losses — the New Mexico Division of Insurance is moving to require insurers to submit more information, including rate histories, when filing new rates.
“This paves the way for the public vetting of the factors underlying the rate increase,” Public Regulation Commission (PRC) Commissioner Jason Marks told The Independent at the Supreme Court. “The public can’t help but benefit from hearings.”
After hearing oral arguments from Blue Cross attorney Paul Bardacke, Attorney General Gary King and Insurance Division attorney David Barton, justices retired to chambers for approximately 25 minutes Wednesday morning. They briefly emerged for Justice Petra Jimenez Maes to announce the court was denying the company’s petition.
Insurers should not be subject to repeated hearings after a rate hike has been approved by the insurance superintendent, Bardacke argued.
“Where is the finality for consumers, first of all?” he asked in oral arguments before the court.
But the Supreme Court was not the appropriate venue for the case, Maes stated Wednesday morning, echoing Barton’s oral argument that the high court’s intervention would only be appropriate if Blue Cross had no other recourse to appeal the Division’s decision. Under state law, Blue Cross can appeal a withdrawal of any rate hike approval in district court.
“We respect the finding of the Court and will be at the hearing August 25,” Bardacke, who represents Blue Cross Blue Shield NM, told The Independent. “We were pleased Attorney General Gary King indicated the (rate hike) settlement was fair and equitable, and in the best interest of all New Mexicans.”
The Attorney General’s office had helped negotiate and stood by the controversial rate hike settlement, but Gary King appeared before the Supreme Court to defend the Insurance Superintendent’s authority to hold public hearings and review the justification for the rate hike.
The Insurance Superintendent has discretion under state law to hold the scheduled hearings, Gary King argued.
“A final order reversing approval would not be discretionary,” Gary King clarified to The Independent after the Court’s decision. “There would have to be some reason for rejecting the rate increase. There would have to be some different or additional evidence presented at the hearing” to reverse the rate hike approval.
“It’s a new day for consumers in New Mexico,” PRC chair David King told The Independent, adding that Legislature should now empower the PRC to hear appeals of future rate hikes. Currently, appeals must be filed in district court.
“I’m happy New Mexicans will get a chance for new hearings and we’ll do things now that should have been done orginally,” PRC Commissioner Jerome Block Jr. said. “Hopefully the surpluses prove that the rate increases are not justified and New Mexicans can be spared this increase. They have a lot of nerve to come ask for an increase, frankly.”
Blue Cross and Blue Shield health insurance plans across the U.S. have raised policyholders’ rates while accumulating billions of dollars in surpluses – much more than necessary to protect the companies, according to a Consumers Union study released Thursday.
Leslie Margolin, 55, ran Athem for just 2 1/2 years. She has faced intense criticism from California lawmakers and the Obama administration, including U.S. Health and Human Services Secretary Kathleen Sebelius, who questioned the rate increase and described it as excessive. More …
Theresa Becenti-Aguilar‘s top priority on the Public Regulation Commission (PRC) will be empowering PRC employees, she told staffers this week — but protecting consumers will be a close second, she said.
The Insurance Division’s negotiation of a controversial…
The company filed a motion July 2 with the state Insurance Division, saying the public hearing and division review of the rate hike should be delayed until the Supreme Court has ruled on the matter, because preparing for the public hearing would be time consuming and the court may toss the PRC’s decision to reverse approval of the hike. More …
Aetna has become the second health insurance company in California since April to scrap planned rate hikes, following revelations last week that “math errors” in the company’s application exaggerated justification for the proposed rate increase.
The company had sought a…
Blue Cross Blue Shield has asked the state Supreme Court to block the PRC’s decision to suspend a controversial 21 percent health insurance rate hike. The company says it complied with all regulations in pursuing the rate hike and negotiated with the Attorney General’s office and Insurance Division in good faith to arrive at the settlement. That settlement came after the state’s expert concluded the rate hike was unjustified and the company had “inflated” its losses.
The Attorney General’s office cannot say whether or not it received all of the financial records it demanded from Blue Cross Blue Shield of New Mexico before signing off on a controversial April 26 rate hike settlement, according to spokesman Phillip Sisneros.
The Blue Cross Blue Shield New Mexico health insurance policyholder who signed off on last month’s controversial rate hike settlement, has asked the state Insurance Division to reverse its approval of that deal.
Jody Neal-Post submitted a…
Blue Cross Blue Shield of New Mexico did not provide the state Insurance Division with documentation for financial losses and expense figures cited as justification for last month’s controversial health insurance rate hike, Public Regulatory Commission (PRC) records show.
The company’s defense for failing to back up their figures with supporting evidence? Regulators did not ask for any.
Insurance Division staff have not required Blue Cross Blue Shield NM, or other health insurers, to submit documentation supporting rate increase requests, Blue Cross Blue Shield officials said, leading PRC Commissioner Jason Marks to describe the Division’s regulatory culture as “insufficiently skeptical.”
Rate hike application ‘not properly documented’
When the Attorney General’s office hired award-winning insurance rate analyst and former New Jersey insurance regulator Allan I. Schwartz as an independent expert to review Blue Cross Blue Shield’s rate hike filing, he reported that supporting documentation for most of the figures cited by the company was missing. And what little data was available, Schwartz concluded, contradicted the company’s claims.
The company’s requested rate hike was not justified, he concluded.
“The BCBSNM rate filing was not properly documented and supported,” Schwartz said in testimony to the Insurance Division March 2. “The filing did not provide sufficient documentation regarding numerous aspects of the BCBSNM rate calculation … Hence, the filing does not provide reasonable actuarial support for the proposed rate changes.”
Approving the rate hike would “continue a pattern of large rate increases for New Mexico health insurance consumers,” Schwartz cautioned, making it “increasingly difficult” for New Mexicans to afford individual health insurance.
The company presented numerous complex economic expense and loss indicators — variables such as “duration adjustments,” “deterioration adjustments,” and “annual deductible leverage.”
These figures were used to calculate an “Indicated Rate Change.”
Data presented contradicted BCBS claims
But the figures may have been smoke and mirrors, Schwartz suggested.
“The problem with the BCBSNM filing is that none of these various components … were documented or supported,” he said.
Where data was available, it contradicted Blue Cross Blue Shield’s claims, Schwartz found.
The “annual base trend” is an estimate of past financial losses. It is used to adjust projected future revenues from individual insurance policy premiums.
Schwartz calculated the company’s actual yearly loss trends on individual-market insurance policies over the past seven years and found they had varied between 4 and 8 percent — well below the 10 percent a year claimed by Blue Cross Blue Shield.
“Based upon this analysis, the loss values used in the BCBSNM rate filing are inflated and result in an excessive rate indication,” Schwartz said.
The Insurance Division and Attorney General’s office staff nevertheless negotiated a weekend rate settlement deal to raise Blue Cross Blue Shield rates by 21.3 percent for approximately 40,000 New Mexicans, without a public hearing that had been ordered by PRC commissioners. Former state insurance superintendent Morris “Mo” Chavez resigned in the face of outrage over the deal expressed by policyholders and PRC commissioners. Interim superintendent Tom Rushton, who helped negotiate the deal, subsequently resigned after PRC commissioners voted to direct him to vacate Chavez’s approval of the rate hike.
Parent company had surplus of $6.7 billion
Last month’s rate hike was just the latest of many, The Independent found. The Insurance Division had approved Blue Cross Blue Shield rate hikes every year since 2004, PRC documents show.
Blue Cross Blue Shield NM officials and former state insurance superintendent Morris “Mo” Chavez repeatedly raised the specter of the insurer’s solvency and financial losses. But asked about the financial condition of the insurer’s parent company, Health Care Service Corporation, Schwartz painted a very different picture, testifying the firm “has a strong financial position.”
“At year-end 2009, Health Care Services Corporation had a surplus of about $6.7 billion,” Schwartz testified, citing the corporation’s annual report.
In each year since 2004, the Insurance Division approved Blue Cross Blue Shield NM rate hikes. But for each year since 2005, Schwartz found, Health Care Service Corporation had a net income of at least $500 million, for a total net income of $4.4 billion.
Health Care Services Corporation’s net income last year exceeded $740 million, according to a May 25 online company profile.
Health Care Services Corporation’s annual report also showed “a much lower level of expenses” than Blue Cross Blue Shield NM claimed to the Insurance Division, Schwartz noted.
Blue Cross Blue Shield told state regulators that 26 percent of insurance premium revenues go to corporate expenses, but the parent company’s annual statement shows an 11 percent expense ratio, Schwartz said.
“While there may be an explanation for the dramatic difference in the expense ratios shown for Health Care Services Corporation as a whole and the values BCBSNM included in its filing, BCBSNM has not provided such an explanation,” Schwartz said.
Nor did the company include in their projected future losses, the savings resulting from disease prevention and wellness programs, Schwartz noted — even though those programs had explicitly been adopted to reduce policyholders’ medical claims costs.
Regulators did not request supporting documentation
Blue Cross Blue Shield did not provide supporting documentation for its claims because they were never asked to do so, according to company officials.
The Blue Cross Blue Shield rate increase filings included “everything required by the New Mexico Insurance Division,” Director of Actuarial and Underwriting Department Kevin Carr testified April 9, citing a Division checklist for rate increase filings. “We are not required by the NMID (Insurance Division) to include all of this documentation in our rate filing.”
“Based on my discussions and correspondence with the (Insurance Division) staff, they felt that our assumptions, including trend, were reasonable,” Carr testified.
Rate increase filings in New Mexico “generally do not include all of the underlying data”, Carr said. “In fact, based on my review of rate filings of other insurers in New Mexico, we generally provide much more information in our filings than most of the other insurers.”
Insurance Division staffers take insurers’ figures at face value, Carr’s testimony suggested.
For example, the 10 percent “annual base trend” figure Schwartz found to be inflated had been accepted by Insurance Division staffers even without the underlying data, Carr claimed.
“The 10 percent assumption for the annual base trend was specifically reviewed by and discussed with (Insurance Division) staff as part of the rate increase process, and they agreed that it was a reasonable assumption,” Carr said.
Insurance Division staff did not question the other figures, Carr said.
“The (regulatory) culture is insufficiently skeptical,” PRC Commissioner Jason Marks said. “On health care, the assumption is costs are just a national disaster and nothing can be done about it … that it’s unavoidable. But rates are rising faster than needed. There needs to be more skepticism, and related to that I’d like to see a different orientation. The regulator has a responsibility to make sure every penny passed on (to consumers) is required by law.”
Marks had described last month’s weekend rate hike settlement as “a back room deal,” a reference to the Insurance Division’s failure to hold public hearings.
The Division has a responsibility to confirm insurers have prudently incurred the expenses cited in rate change filings, Marks said.
“Just because there’s a cost in your accounting system doesn’t mean you accrued it responsibly and can pass it on to consumers,” Marks said.