The U.S. Census Bureau released its findings on income, poverty and health insurance coverage for 2010, finding that median household income declined by 2.3 percent to $49,445, poverty rose to 15.1 percent from 14.3 percent and the number of uninsured rose by a statistically insignificant number.

The numbers on income and poverty show the magnitude of the recession. Since 2007, household income has declined by 6.4 percent and remains 7.1 percent below its 2001 peak. The percentage of people living in poverty — an income of $22,314 for a family of four – was at its highest level since 1993. Another sign of the high unemployment rates (or simply decreased income) was the number of “doubled-up” households — or households with an additional non-spouse, partner or someone attending school — increased by 2 million to 21.8 million, and the percent rose by 1.3 percentage points from 17 percent to 18.3 percent. Joblessness has been taking its toll on young adults, too — 5.9 million young adults aged 25-34 lived with their parents, an increase from 4.7 million before the recession.

In health coverage, the percentages of insured and uninsured both increased, but not by a statistically significant number. Despite reduced incomes, the percentage receiving Medicaid (15.9 percent) remained unchanged, too soon to show any statistical effects from the Affordable Care Act. The exchanges in the health reform law aim to reduce the number of uninsured by offering subsidized private insurance and do not take effect until 2014. Measures such as expanding coverage to young adults under 26 through their parents’ insurance or prohibiting companies from rescinding coverage based on pre-existing conditions did not take effect until September 2010.

Four of the state’s major health insurers plan to limit the number of new insurance policies they write for children with preexisting conditions, prompting the state to take action earlier this month to ensure youngsters potentially affected won’t go without health coverage.

New Mexico threw open the doors of its high-risk pool to youngsters upon learning that the insurers were, in effect, largely walking away from writing new child-only insurance policies.

The nation’s new health care law prohibits insurers from denying coverage to children under 19 with preexisting conditions, but insurance companies fear that means families with sick kids could sign up for policies right before extremely expensive treatments, leaving them with no choice but to cover the sky-high bills.

The board for the New Mexico Medical Insurance Pool voted to waive a rule requiring applicants show proof, usually in the form of rejection notices, that they are uninsurable. The action was taken to ensure the children get coverage, Deborah Armstrong, the pool’s executive director, said Monday.

“We saw the children as a class of individuals who wouldn’t get insurance coverage,” Jason Sandel, acting board chairman of the high-risk pool, told The Independent.

The insurers’ decision to severely limit new child-only policies provoked disappointment, even indignation, in some corners Monday.

“While we are proud to be offering coverage to the state’s uninsured children at this time, the current neglect of children within the private market is very unfortunate,” Sandel is quoted as saying in a news release issued late Friday.

One health care advocate had even stronger words.

“It’s hard to hear this in a country that prides itself on equality that we would fight over children with preexisting conditions,” said Barbara Webber of Health Action New Mexico, which advocates for affordable and accessible health care.

State doesn’t know how many kids will be affected

Lovelace, Presbyterian, United and Blue Cross and Blue Shield all notified the state that they intend to limit how often they will take applications for health coverage for children with preexisting conditions to once or twice a year in open enrollment periods, state officials said Monday. The notifications came during a meeting of the high-risk pool’s board Oct. 14 and 15, Sandel said.

That change is a sharp deviation from past practice in which insurers allowed enrollment all year long, and would severely limit how many child-only policies are written.

Presbyterian and Blue Cross Blue Shield could not be reached for comment Monday afternoon. The Independent previously reported on Lovelace Health Plan and its plans to allow parents to apply for child-only health policies only to one month every year.

It is unclear how many children might be affected by their decision. But state officials said the number didn’t matter.

“Whether we’re talking about one child or 1,000 children up to the age of 19 who aren’t being provided services as the Patient Protection and Affordable Care Act (PPACA) intended – these young people will be allowed access to our pool – that’s what we do,” the state’s insurance superintendent, John Franchini, is quoted as saying in last week’s news release.

Currently, premium rates for children at the New Mexico Medical Insurance Pool are $142 per month for a $500 deductible plan, according to last week’s news release. Premiums are lower for higher deductibles.

Policies will still be available in New Mexico—but parents will only be able to apply during one or two months per year

It’s unclear when the health insurers will hold their open enrollment periods. “All of them apparently want to hold their respective open enrollment periods at different times of year,” Gerald Garnder, a spokesman for the New Mexico Public Regulation Commission, told The Independent via e-mail Monday.

Franchini and members of the Insurance Division will meet with these companies next week to discuss the particulars, Garner said.

At heart in the insurers’ decision is the tug of war inherent in the insurance industry between balancing costs and spreading the risk around of pay outs due to unexpected medical costs.

Insurance is at its core based on the concept of shared risk, meaning the more people who are insured reduces the risk of catastrophic medical costs an insurer is required to pay out in certain situations. A requirement to cover already sick children could expose insurers to large medical costs, industry officials have said.

A health insurance industry representative has described the new federal provision as a powerful incentive to parents to wait until their child becomes sick before they buy insurance, potentially costing insurers money.

That money comes on the heels of a $1 million federal grant to revamp the Division’s regulation of health insurance rates.

The new grant will be used to help consumers file complaints and to appeal insurance company decisions, track and analyze trends in those complaints, and to fund a full-time staff position to assist consumers who are seeking health insurance coverage, according to spokesman Gerald Garner and the Division’s grant application.

“I think it’s a very significant development,” state Sen. Dede Feldman said.

The grants will improve the Division’s attention to consumer protection, Feldman said. The earlier grant will help fund a new Consumer Protection Bureau at the Division and a public website detailing proposed insurance rate hikes, Feldman emphasized.

The grants are representative of a larger effort by the Division to reform itself, Feldman said.

Feldman is drafting legislation to strengthen the Public Regulation Commission (PRC)’s and Division’s regulation of insurance rates, she said. A draft of her bill should be available by mid-November and will likely allow Division analysts to consider insurers’ executive compensation and cash surpluses when considering rate hike approvals, Feldman said.

“Anything we can do through the Division of Insurance to assist consumers is a positive step forward,” Superintendent of Insurance John Franchini said. “This grant award allows us to implement new measures and to strengthen existing measures for improving our education efforts and ultimately empower consumers to make sound choices with regard to their health insurance coverage. We’re really excited about it.”

The grant was awarded by the Department of Health and Human Services (HHS) Office of Consumer Information & Insurance Oversight.

“The Division of Insurance deserves a hand for securing this important grant that will ultimately benefit New Mexico’s insurance consumers,” PRC Commissioner Jerome Block, Jr., said Wednesday. “The staff is working diligently to ensure that the best information and services are available.”

Franchini inherited a beleagered Division that faces allegations of lax oversight of health insurance rates.
Shortly after Franchini took the helm, the National Association of Insurance Commissioners (NAIC) issued a scathing audit report slamming the Division on staff qualifications and poor oversight of industry.

Franchini initially failed to alert commissioners to the audit report’s findings — an “oversight,” he said — and subsequently worked to prevent its discussion at public meetings. The Independent published the audit report last month.

The NAIC placed the Division on probationary accreditation status, pending implementation of the Division’s corrective action plan. The Division has refused to disclose the action plan to the public, in response to public records requests by The Independent.

The Government Restructuring Task Force has drafted a constitutional amendment and companion legislation that would abolish the scandal-plagued PRC, which is the state’s most powerful regulatory agency.

But the proposed legislation would give regulated industries an “unusually blatant” role in reassigning regulatory jurisdictions to other executive-branch agencies, Commissioner Jason Marks warned.

The PRC regulates public water, electricity and gas utilities, insurance and telecommunications companies and motor carriers, including ambulance services. It also administers the State Fire Marshal’s Office, the New Mexico Firefighters Training Academy in Socorro, N.M., the state Pipeline Safety Bureau and the Corporations Bureau.

“You can use whatever semantics you want, but the question is: Are you discussing public business with this elected body? Yes or no?” said Sarah Welsh of the Foundation for Open Government. ”If that is happening, I think that is exactly what the OMA (Open Meetings Act) was designed to prevent.”

Welsh’s remarks came as State Insurance Superintendent John Franchini has said he plans to meet individually with members of the Public Regulation Commission (PRC) to go over details of a “corrective action plan” put together in response to a recent critical audit of the state’s insurance division.

The agency’s chief legal counsel and one Public Regulation Commissioner defend the action, saying the PRC won’t run afoul of the state’s open meetings law because of a quirk in how the PRC and the state’s Insurance Division relate to each other.

A strange relationship

The PRC doesn’t regulate the insurance industry, and therefore has no jurisdiction over the plan in question. But the PRC supervises the insurance superintendent, who is presenting the plan as a courtesy, officials said.

“This is about keeping the commissioners informed because they are supervisors of the superintendent,” David Barton, the Insurance Division’s chief legal counsel, said in a telephone interview.

Because they lack jurisdiction, Public Regulation Commission members can hear the details of the plan individually because they won’t be taking action on public policy, say Barton and Public Regulation Commission member Sandy Jones.

“We have a superintendent who has proactively come forward … and want to disclose this to the commission so we start to have better communications,” Jones said in an interview.

But Welsh dismisses that as a way to get around the state’s open meetings act.

“There’s a common misconception that as long as a public body doesn’t vote, or doesn’t plan to vote, it’s not a meeting,” Welsh wrote in an e-mail. “That’s simply not true. Any discussion of public business by a quorum is subject to the Act.”

Welsh added, “They may think they’ve figured out a ‘loophole,’ but they’ll lose the public’s trust and confidence in the process. So what have you really gained?”

Welsh appears to have past determinations by the Attorney General’s office to bolster her opinion of the situation.

Serial quorums are a no-no

All meetings of a quorum of members that are held to “formulate public policy, discuss public business or take action are required to be open to the public” and “cannot be circumvented by what are commonly referred to as ‘serial’ or ‘rolling’ quorums,” according to a letter from the Attorney General’s office on a 2007 Open Meeting Act complaint.

Serial or rolling quorums are where a public body’s members discuss public business or take action through a series of contacts “in person, by e-mail, telephone, letter or otherwise” between individual members outside of a public meeting, the letter says.

The 2007 complaint concerned actions taken by Santa Fe County School Board members who spoke by phone about a public issue before a meeting.

Barton, the Insurance Division’s chief legal counsel, said the 2007 case and the current situation involving the PRC are different. In one case the Santa Fe County School Board had jurisdiction over the subject being discussed. In this situation the PRC doesn’t have jurisdiction over the corrective action plan.

Adopting a higher standard than just legality

But Public Regulation Commission member Jason Marks says even if the commission lacks jurisdiction its members should attempt to be as open as possible.

“My position on this is that even if we meet the legal requirements of OMA (Open Meetings Act) and IPRA (Inspection of Public Requests Act), that shouldn’t be our standard,” Marks said. “Our standard should be to be as open as possible.”

Besides, the insurance superintendent should be proud of its corrective action plan, Marks said.

“The draft I saw is a good plan,” Marks said. “It talks about filling vacant positions, about training staff. It had specific classes for specific people, specific curriculum for specific people. It’s detailed. It’s not generic. And it’s got specifics on changing business practices … like how things will be reviewed.”

The National Association of Insurance Commissioners accredited the state’s Insurance Division after a recent audit, but the agency is on probationary status until a corrective action plan is completed to address deficiencies identified by NAIC auditors.

Among other things the auditors found that the state Insurance Division’s Financial Examinations Bureau is understaffed and that financial analysis staff had “marginally sufficient experience” and needed more training on insurance operations, reserves, accounting principles and other areas, according to the nine-page report.

A review of the insurance division staff analyses found them not to “be in-depth and challenging in nature” and staff analyses contained “numerous deficiencies,” the report noted.

Any discussions about a proposed reorganization of the Insurance Division would be conducted behind closed doors anyway, Barton said, because the restructuring would run afoul the state’s personnel code even if the plan doesn’t identify employees.

“Our divisions are so small you are talking about easily identified individuals,” Barton said. “Eventually all of this will be public.”

Barton explained that any reorganization of the Insurance Division that eventually took effect would have to go before the Public Regulation Commission for its approval.

Others include a ban on health insurers imposing lifetime limits on coverage, meaning that the insurers can no longer discontinue coverage once spending on an individual’s or a family’s health insurance hits a certain predetermined level.

The new law also tackles annual dollar coverage limits currently in place, with a provision taking effect today that raises the limit a health insurer can spend on “essential” health benefits each year.

Here’s a short, informative explainer from Kaiser Health News on the provisions taking effect today.

That’s below the national average of 81.9 percent enrollment—but most of New Mexico’s neighboring states have lower rates. Colorado, Utah, Arizona and Texas had all enrolled fewer than 79.2 percent of eligible children in SCHIP, according to the 2009 data. Oklahoma enrolled 81.4 percent of eligible children, roughly matching New Mexico’s enrollment.

SCHIP was established by Congress in 1997 to provide health insurance to children in families at or below 200 percent of the federal poverty line.

In contrast, Vermont, Massachusetts, and Washington, D.C. led the nation, with each enrolling more than 94 percent of eligible children in SCHIP, according to the report.

More than three-quarters of children in New Mexico (78.6 percent) live below 200 percent of the poverty level, and the state has the 7th highest percentage of uninsured children, according to a report released earlier this month by the Robert Wood Johnson Foundation. New Mexico has 5th highest percentage of uninsured children ages 6 to 12, with 36 percent of Native American children and 14 percent of Hispanic children lacking health insurance.

In 2007, Congress approved expanded SCHIP funding but the bill was vetoed by President George W. Bush.

Additional figures show New Mexico has 5th highest percentage of uninsured children ages 6 to 12. Across the state, 36 percent of Native American children, 14 percent of Hispanic children 4.6 percent of white children lack health insurance.

For more information on New Mexico, go to pages 130-132 in the report.

“This is a dog and pony show,” Santa Fe resident Vance Ley told The Independent at the state Division of Insurance hearing in Santa Fe. “It’s very unlikely they’ll rescind the increase.”

The company said it had to raise rates because it has lost $20 million on New Mexico policies over the past three years.

Rates have steadily gone up, despite billions in reserves

But this year’s rate hike was just the most recent in a seven-year string of annual premium increases on Blue Cross policyholders who purchase their own health insurance, Division records show.

During that time, Health Care Services Corporation, of which Blue Cross Blue Shield NM is a division, has accumulated $7.2 billion in surplus reserves, according to new second-quarter corporate earnings reports, Consumers Union attorney Sondra Roberto said.

That would be enough money to absorb Blue Cross’s claimed losses for 1,000 years, a policyholder pointed out.

“This is a very profitable company,” Roberto said. “Its surpluses since 2009 have grown from $6.7 billion to $7.2 billion. Any of its relatively small losses pose no threat to the company.”

The company should use some of its surplus to absorb losses and avoid raising rates on policyholders during a recession, Roberto and several policyholders argued.

But state Division of Insurance staff, the Attorney General’s office and Blue Cross attorneys all asked Division hearing examiner Alan Seeley to reaffirm the rate hike.

Even the Attorney General’s office’s expert witness Allan Schwartz – 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.”

Blue Cross’s rate hike had been unfairly singled out for scrutiny, attorney Paul Bardacke argued.

The rate hike “is in line with a 24 percent increase the state approved for Presbyterian – Blue Cross’s major competitor in the New Mexico market – just last year,” Bardacke said. (The Independent requested Division of Insurance records on Presbyterian’s rate history in July, but Division staff did not locate the records until Wednesday evening. The records confirmed Bardacke’s claim that Presbyterian was granted a 24 percent insurance rate hike in 2009.)

Opposition to Blue Cross’s rate hike was only heard after the hearing, during a public comment period.

“I came to this hearing under the impression this was still under discussion and public opinion would be taken into account, but obviously, I was mistaken,” Santa Fe resident Jack Huberman said after the hearing. “Now I’m wondering what we’re all here for. Last September – not even a year ago – we had another 24 percent rate increase. Now there’s another increase for 21 percent. I hope that’s taken into consideration.”

Of the five Public Regulation Commission (PRC) commissioners, who oversee the semi-autonomous Division and pushed for public hearings on Blue Cross’s rate hike, only Jason Marks attended the majority of the all-day hearing. AG Gary King was not present.

Blue Cross executives brought bodyguards to hearing

The outspoken audience of more than 100 people repeatedly hissed, groaned and shouted at Blue Cross attorneys during the hearing.

The audience was peppered with at least ten armed plain-clothes security officers, including at least five bodyguards hired by Blue Cross to protect the company’s executives and attorneys. Other Blue Cross bodyguards were deployed throughout the building, monitoring stairwells and exits.

Several PRC insurance division fraud investigators provided security for Superintendent of Insurance John Franchini.

Blue Cross executives left the hearing before the public comment period, surrounded by their security contingent.

“Where are you going? Why are you leaving now?” audience members shouted during the Blue Cross executives’ exodus.

Commissioners expect the increase will be reaffirmed

The 21 percent rate hike resulted from an April settlement between Division staff, the AG’s office, Blue Cross and policyholder Jody Neal-Post, who had filed a lawsuit in response to the Division’s earlier approval of a 24.6 percent increase.

The rate settlement — reached the weekend immediately before a scheduled public hearing on the rate hike –outraged policyholders and PRC commissioners, leading to insurance superintendent Morris “Mo” Chavez’s resignation.

Acting superintendent Johnny Montoya subsequently suspended the rate hike pending Wednesday’s public hearing.

But many policyholders in the audience said they held out little hope that suspension would survive.

Their pessimism was reasonable, two PRC commissioners told The Independent.

“I don’t want to get people’s hopes up,” Marks said. “The fact is, this is an uncontested settlement.”

“I expect the rate increase will be reaffirmed,” Commissioner Jerome Block, Jr. said before the hearing. “The data is there. The insurance division staff – their work was not flawed. At least the public has a chance to vent its opinion and hear why the rate (hike) is justified. If it’s granted, at least they’ll know why it is.”

Block briefly attended the hearing Wednesday morning but did not return after lunch, to the consternation of some of his Santa Fe-area constituents.

Attorney General defended rate increase compromise as ‘a bird in the hand’

Although Assistant Attorney General Brian Harris asked Seeley to reaffirm the rate hike, he emphasized the AG’s agreement to the April settlement had not been the result of confidence the hike was justified.

The settlement cut the rate hike from 24.6 percent to 21.3 percent, on average, for 40,000 New Mexicans, Harris said.

“It was very much a matter of the bird in the hand versus two in the bush,” Harris said. “I believe the AG got the best result he could under the circumstances.”

AG Gary King felt “honor-bound” to support the settlement, Harris said.

“One has to wonder, if the AG thought there was insufficient support (for the rate hike), why he’d approve it,” Bardacke said.

“It wasn’t a question of having enough data – we knew we didn’t,” Harris responded. “We also knew doing anything about that would be difficult. We had a bird in the hand worth $3 million a month to New Mexican policyholders.”

Cost containment efforts questioned

Illinois-based Health Care Services Corporation (HCSC), of which Blue Cross Blue Shield New Mexico is a division, has pushed to contain rising costs to mitigate rate hikes’ impacts on patients, its attorneys argued. Corporate layoffs and the construction of a new headquarters building in Albuquerque have saved the company more than $1 million a year, they said.

But Blue Cross and HCSC executives’ salaries and bonuses have not been cut, Blue Cross Vice President Kurt Shipley conceded, to howls from the audience.

Top HCSC officials have received bonuses of up to $15 million a year, according to filings with the Illinois Department of Insurance.

“I’ve heard so much mumbo jumbo this morning my head is spinning,” said Santa Fe physician Timothy Wong. “Mark my words: next time this year, they’ll come back to ask for another rate increase.”

Many policyholders have had to increase their deductibles to help minimize annual rate hikes, they said. But Blue Cross officials have said they will no longer be allowed to do that, policyholders complained.

Health insurance costs more in rural areas, Blue Cross says

Insuring rural New Mexicans is more expensive than insuring urban policyholders, Blue Cross Blue Shield officials and attorneys repeatedly argued when explaining losses on individual market policies over recent years.

“But I didn’t hear evidence the rate of increase is higher in rural than urban areas,” Commissioner Marks noted. “If that was the case, it would buttress Blue Cross’s case. I also did not hear questions or any analysis of whether operating expenses factored into these rates – or whether they depending on anything but wishful thinking. One could ask whether the company has behaved prudently in incurring expenses (such as) office buildings they’ve built, executive compensation.”

State senator calls for an independent analysis

Sen. Dede Feldman, D-Albuquerque, called on the Division to seek an independent analysis of Blue Cross’s rate filing from a contract actuary.

“This proceeding’s been somewhat awkward since all the testimony is in defense of the settlement,” Feldman said. There’s been no opportunity for those who disagree with the 21.3 percent to ask questions. … It would behoove us all to take a deep breath and get a truly independent actuarial opinion.”

Incoming insurance superintendent John Franchini said that was a good idea for future cases, but that it was too late to do so in this case.

But several policyholders liked Feldman’s idea.

“I received rate increases in 2005, 2006, 2008, 2009 and 2010,” policyholder Ed Oppenheimer said. “When I try to change plans, I start from scratch – preexisting conditions, the whole thing. But if Blue Cross wants to change my rates, I just get a letter in the mail.”

The Presbyterian health insurance rate hike of 24 percent was approved in October 2009 and went into effect Jan. 1.

Like Blue Cross Blue Shield N.M., Presbyterian has increased rates on some customers every year since 2004, Division records show. But between 2004 and 2010, Presbyterian’s rate hikes totaled 88 percent, considerably lower than the 150 percent jumps seen by many Blue Cross policyholders in New Mexico.

Blue Cross has come under fire for allegedly failing to provide enough information to justify raising rates, but Presbyterian gave even less information— just over 30 pages, compared to the more than 100 pages Blue Cross filed.

The Presbyterian rate filing also claimed an even higher loss trend rate, 11 percent per year, than Blue Cross’s claimed 10 percent.

An independent expert hired by the Attorney General’s office has testified Blue Cross’s 10 percent trend rate was exaggerated.

At a division hearing on the Blue Cross rate hike Wednesday, Blue Cross attorney Paul Bardacke cited the Presbyterian rate increase as evidence Blue Cross’s hike was reasonable.

“It is in line with a 24 percent increase the state approved for Presbyterian – Blue Cross’s major competitor in the New Mexico market – just last year,” Bardacke said.

Presbyterian’s rate hikes in 2004, 2005 and 2006 targeted child-only policies, records show.

All individual policies saw increases in 2007 and 2008, records show, averaging 11.2 percent and 24 percent respectively.

“Many of our members saw no increase,” Presbyterian spokeswoman Elizabeth Brophy told The Independent.

Following its investigation into Blue Cross’s health insurance rate history, The Independent requested in June Division of Insurance records on other health insurance companies’ rate histories, including Presbyterian’s. Division staff were unable to locate Presbyterian’s rate history records until Wednesday evening.

Presbyterian Insurance Company is owned by Presbyterian Healthcare Services (PHS).