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…
While environmental activists played their part yesterday during demonstrations at the capitol building, going so far as to dress up as solar panels and to sing the tune of “You Are My Sunshine,” their counterparts, the anti-cap-and-trade contingency who has…
Roughly one quarter of University of New Mexico students are unimpressed with the state’s flagship public school, according to a survey that questioned college students about their higher education experiences.
In the latest round of what one commissioner described as “musical chairs” at the state Insurance Division, acting superintendent Craig Dunbar was replaced Thursday.
The Public Regulation Commission (PRC) unanimously appointed Johnny Montoya as the new acting…
PNM filed a request last week for approval of another 21.2 percent hike that would take effect in April 2011. But two PRC commissioners said Tuesday they would not be open to accepting a rate hike settlement before next year. The Commission’s go-slow approach with PNM contrasts with the Insurance Division’s rushed weekend deal with Blue Cross Blue Shield—before public hearings on that company’s request.
State land commissioner Patrick Lyons “really pounded (Robert) Corn” in the Republican primaries for Public Regulation Commission (PRC) District 2, PRC Chairman David King said Tuesday.
“Unless he does something, it’s his to lose,” King, District 2′s…
Michael A. Rivera of Corrales has been appointed as the state Public Regulation Commission (PRC)’s new Chief of Staff. Rivera will oversee a PRC staff of more than 270 employees. His position pays $130,000 a year.
Rivera arrives at the…
The hotly contested Democratic primary for Public Regulation Commission (PRC) District 4 Commissioner Carol Sloan’s seat was won convincingly by the only woman and Native American in the race, Theresa Becenti-Aguilar.
With 35.8 percent of the Democratic primary vote,…
Candidates for three hotly contested seats on New Mexico’s powerful and troubled five-member Public Regulation Commission (PRC) will be selected in today’s primaries.
The PRC regulates the state’s electrical, natural gas, and water utilities, insurance industry, and administers…
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.
Public Regulation Commission (PRC) Commissioner Jason Marks of Albuquerque, who is attending a two-day renewable energy transmission conference in Arizona, was “a little surprised” Thursday afternoon to learn other commissioners had appointed Craig Dunbar as the new…
PRC Chairman David King’s executive assistant, Craig Dunbar, was named the state’s new interim insurance superintendent Thursday afternoon. Among Dunbar’s first tasks will be taking over the Blue Cross and Blue Shield of New Mexico rate hike fight as its new hearing officer, King told The Independent.
Interim state Insurance Superintendent Thomas Rushton will retire effective June 22, Public Regulation Commission (PRC) Chairman David King confirmed Monday evening.
Rushton was appointed Interim Insurance Superintendent May 4, immediately upon the resignation of former superintendent Morris…
New Mexico Public Regulation Commission (PRC) commissioners Thursday morning unanimously directed Interim Insurance Superintendent Thomas Rushton to rescind the Insurance Division’s controversial approval of a 21.3 percent hike in the health insurance rates for individual policyholders of Blue Cross Blue Shield N.M.
Rushton announced that he had recused himself from further involvement in the case.
That, at least, came as welcome news to the Attorney General’s office, according to Spokesman Phillip Sisneros.
“We do support Mr. Rushton’s recusal from a hearing on the matter,” Sisneros said. “(But) our position is still in support of the settlement. Remember, our agency is not the policy making authority on this issue and in fact, we were asked to step in to help find a resolution. We are happy to continue in that advisory role in the future.”
Rushton appeared reluctant to rescind the Insurance Division’s April approval of the rate hike, telling commissioners that rate change review procedures had been followed.
“There was a hearing conducted,” Rushton said. “There was prefiled testimony. There was discovery. There was a settlement reached, and Morris Chavez accepted that stipulated settlement.”
PRC Chairman David King interrupted Rushton to say that there were outside interests that had not been heard in the rate hike settlement process.
“We’ve had death threats to the Commission, to staff, and the former superintendent (Chavez),” King said. “They certainly followed the law, but it wasn’t done as well as in California,” where a Blue Cross rate hike was recently overturned.
Rushton assigned Deputy Insurance Superintendent Darlene Gomez to be the hearing officer for the reconsideration of the settlement approval. Gomez will receive whatever staffing assistance she needs from the Commission, King pledged.
But the Insurance Division will work under close Commission scrutiny, King said. King said the Commission will also ask for a third-party independent audit of Blue Cross Blue Shield NM’s financial records.
Commissioners King, Jason Marks, and Jerome Block, Jr. have all said they want the PRC to investigate why Blue Cross Blue Shield has a virtual monopoly in much of rural New Mexico.
Marks and Block appeared to try to manage policyholders’ expectations, Thursday.
“I don’t want false hope here,” Marks said. “It’s only right to do what we can. But we don’t want false hope. There’s still a stipulated settlement.”
Block said Blue Cross Blue Shield was starting “from scratch,” as far as he was concerned.
But he cautioned that the company would not take the Commission’s decision lightly, and warned policyholders that the extra scrutiny could backfire on consumers.
“They’re going to come out swinging,” Block said. “There could be (financial) data that justifies a higher increase. I hope the public is ready to face that outcome if it’s substantially different.”
Switching interim superintendents?
Marks also floated the possibility of replacing Rushton as interim superintendent with former insurance superintendent Don Letherer, noting that Rushton is very busy.
“Don could keep the wheels on,” Marks said. “We’d have twice the assurance the job’s getting done.”
Commissioners agreed to add a meeting with Letherer to next week’s Commission agenda.
PNM officials and gas workers were grilled Monday by Public Regulation Commission (PRC) commissioner Jason Marks and an attorney for the International Brotherhood of Electrical Workers, over a potentially explosive 2008 gas leak at the intersection of Albuquerque’s Montgomery and Carlisle blvds. The leak may not have been the busy intersection’s first, and pipeline maintenance and corrosion monitoring lapses were widespread in Albuquerque, commissioners learned.
Store managers at Carlisle and Montgomery in Albuquerque expressed shock Saturday over news reports that the PNM work crews that had dug up their parking lot in 2008 were responding to a potentially explosive natural gas pipeline leak at the busy intersection. The leak had been allowed to languish without repair for two months, between May and July 2008, The Independent reported Friday.
“One of the (PNM) guys, he said, ‘let’s see if we blow the place up’,” Ray Lueras told The Independent. “I thought he was joking but I remember looking at him because he wasn’t laughing.”
Does Blue Cross Blue Shield New Mexico’s rate increase presage a coming stampede from health insurers seeking increased rates prior to the first reforms of the new federal health care laws taking effect? A quick survey of several officials in recent days found differing opinions on the question. But a few pointed to several provisions in the new law that could lead health insurers to request rate increases.
Insurance Superintendent Morris Chavez
State Insurance Superintendent Morris Chavez resigned Tuesday morning, following intense criticism for his approval last month of a 21.3 percent rate increase for Blue Cross Blue Shield New Mexico individual policyholders without any public hearings.
But last month’s contentious rate hike was nothing new.
The state Public Regulation Commission (PRC)’s Insurance Division has approved rate increases for Blue Cross Blue Shield individual health insurance policies every year since 2004, according to state Insurance Division documents obtained by The Independent.
The Independent sought comment from Chavez Tuesday morning, only to learn staff was scrambling to announce his resignation.
In several cases, the rate hikes were comparable to this year’s increase, exceeding 20 percent.
Cumulatively, the increases approved each year since 2004 have pushed up premiums for Blue Cross Blue Shield NM policyholders by as much as 154 percent, Insurance Division records show.
In 2009 alone, rate increases for the company’s Blue Choice and Blue Choice Plus policies increased 19.6 percent and 24 percent, respectively. 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.
The financial impact of rate increases on policyholders can be profound, policyholders told The Independent.
Moya Melody and her husband Kim Radsliff, Santa Fe residents, now spend 30 percent of their income on their Blue Cross Blue Shield NM policy, Melody said.
Last month’s rate increase brought their montly premiums up to $1,305 a month, Melody said. When they first bought their Blue Cross Blue Shield NM policy in 2004, they paid $562, or 16 percent of their household income, Melody said.
Two PRC commissioners want more transparency
Health insurance rate increases have not been contested before in New Mexico, PRC Commissioner Jason Marks told The Independent.
“The only insurance rate increase appealed … in the past decade was an appeal two years ago over title insurance,” Marks said.
PRC Commissioners knew about the 20 percent Blue Cross rate increase in 2009, but had not been aware that the Insurance Division had routinely approved rate increases since 2004, Marks said.
“We knew about the 20 percent (Blue Cross) rate increase last year, but this 150 percent increase (since 2004) is news to me,” Marks said.
In the future, health insurance rate increases exceeding 10 percent should trigger public hearings and full Commission review, Marks said.
Commissioner Jerome Block Jr. agreed.
“It’s unfortunate the Insurance Division has treated rate increases as a routine or typical process,” Block told The Independent. “These aren’t typical times. New Mexicans are struggling. I’d like to see the 10 percent threshold serve as a red flag for public hearings and Commission review.”
The Commission also needs to investigate why Blue Cross Blue Shield NM is the only individual health insurance provider in much of rural New Mexico, Marks said.
Blue Cross Blue Shield NM spokeswoman Becky Kenny did not respond to repeated requests for comment on the rate increases. Nor did Kenny respond to requests for information regarding executive salaries.
Kenny refused to disclose the Blue Cross Blue Shield NM’s tax filings, and would not say whether or not the not-for-profit would provide tax filings to policyholders. Blue Cross Blue Shield NM is a division of Health Care Service Corporation (HCSC), a mutual insurance company that is owned by its customers. Profits must be reinvested in the business or given to customers.
HCSC’s chief executive officer was paid $10.6 million in salary and bonuses in 2008, according to documents filed with the Insurance Division by Consumers Union attorney Sondra Roberto.
Attorney General Gary King supports a change to state law to give the PRC more power over health care rate increases. King’s support comes two days after it was announced that his office had helped negotiate a settlement that allows Blue Cross Blue Shield New Mexico to raise premiums by an average of 21.3 percent on 40,000 New Mexicans. The state insurance superintendent and the insurance division decide health insurance rate increases, while the PRC hears and decides rate-hike requests in the telecommunications, energy and utility industries.
Public Regulation Commission member Carol K. Sloan will return to work Tuesday to attend the regular Commission meeting, Sloan’s executive assistant Luis Ledezma told The Independent.
Sloan was convicted in state District Court April 8 of felony aggravated…
Roughly 40,000 New Mexicans will watch their health care premiums rise by an average of 21 percent after the state struck a weekend deal with Blue Cross Blue Shield New Mexico.
The agreement may be a done deal after Monday, but how it came about had one member of the state Public Regulation Commission howling mad and at least one state lawmaker calling for legislation to overhaul the state’s rate-setting process.
“This should have been deliberated in public,” PRC member Jason Marks said of the rate hike.
PRC commissioners ordered state Insurance Superintendent Morris Chavez last month to hold Monday’s public hearing on Blue Cross Blue Shield’s request to raise rates 24.6 percent, something that insurance Division staff had approved originally in February.
“Instead, we got a backroom deal,” Marks said. “It could be an appropriate, reasonable deal, but I do know I had a lot of questions that haven’t been answered.”
The settlement was negotiated over the weekend by the Insurance Division, state Attorney General’s office and Blue Cross Blue Shield New Mexico, a Division of Health Care Service Corporation.
The rate hike will affect approximately 40,000 policyholders, and will be retroactive, taking effect April 1. The rate increase will affect several individual market health plans offered by the company. Employer-based health plans will not be affected.
News of the agreement surprised and, in certain cases, infuriated some of the more than 50 people that had packed the Public Regulation Commission hearing room in Santa Fe for what had been billed as a public hearing about the company’s request to raise its health insurance premiums. At least eight armed state police officers were on hand Monday, highlighting the tension.
The surprise agreement also led to predictions that the Legislature would tackle how the State Insurance Office sets rates in next year’s 60-day legislative session.
“I think the result of this will be legislation to change rate setting,” Sen. Dede Feldman, D-Albuquerque, told The Independent on Monday afternoon. “I don’t think anyone was happy with this ruling. And I’m hoping for the cooperation of the insurance commissioner and the AG.”
Several attendees of Monday’s meeting, meanwhile, said they were disappointed to learn that the agreement had been forged prior to Monday’s scheduled hearing, especially after some had taken time off from work.
“I came here thinking we’re going to make a difference,” Dr. Christopher Fletcher, a Santa Fe Blue Cross provider, said. “Instead, this was done behind our backs. I don’t care if it was the front room, the back room, or the bathroom.”
How the agreement was struck
State Insurance Commissioner Morris Chavez appeared to take umbrage at the implication that the state or his staff had done something improper in forging the agreement.
“You’ve made some very serious allegations about a backroom deal,” Chavez said to Marks in a moment particularly fraught with tension. “I don’t think it was a backroom deal. To make a statement that the Attorney General of New Mexico made a backroom deal is mind-blowing.”
Chavez told the PRC that the agreement came out of a fear that Blue Cross Blue Shield might pull out of providing health insurance in rural areas around New Mexico. Blue Cross Blue Shield insures up to 70 percent of rural New Mexicans who buy their own insurance, according to Chavez.
“Of concern was they’d potentially be pulling out of the (rural New Mexico) market,” Chavez told the PRC.
The deal struck over the weekend has Blue Cross Blue Shield NM agreeing to continue to sell insurance in rural New Mexico and to do a better job of informing consumers about changes in their coverage, and to provide 60 days’ advanced notice for future rate hikes, Chavez said.
Chavez also pledged to post proposed rate hikes on the Insurance Division website in the future.
Insurance Superintendent’s responsibilities a concern
Chavez said Monday in explaining this weekend’s agreement that he is required by state law to consider the “solvency” or economic well-being of regulated corporations, and Blue Cross Blue Shield NM reports that it is losing money.
That didn’t sit well with Feldman, the Albuquerque state senator.
“They say they were forced to rule on very narrow grounds,” Feldman said. “We need to make sure the public is protected as well as the insurance companies.”
Also of concern to Marks was the insurer’s “medical loss ratio” — or how much of revenue is spent on medical care — of 66 percent.
“I wonder (about) the loss ratio in the 60 to 66 percent range,” Marks said. “We as a state just passed a law saying the minimum loss ratio should be at least 75 percent. We could ask why 33 percent on overhead and administrative compensation is reasonable, and why they’re sitting on more than $6 billion in reserves. …I would have liked to have heard these questions addressed in a public process.”
Marks was referring to a new law that limits how much an insurance company can spend on administrative costs.
Blue Cross Blue Shield NM owner HCSC is a mutual insurance company, owned by its customers; profits must be reinvested in the business or given to customers. But HCSC’s chief executive officer was paid $10.6 million in salary and bonuses in 2008, according to Consumers Union attorney Sondra Roberto, who had urged Chavez to reverse the rate increase.
“They have a lot of money,” Fletcher, the doctor and Blue Cross Blue Shield provider, told The Independent of Blue Cross Blue Shield NM. “They just lie straight out. Payments for us doctors, Blue Cross is one of the worst.”
The rate hike will hit some hard
The details of Blue Cross Blue Shield’s business structure was lost on Moya Melody, who was concerned with more immediate matters. Melody, who attended Monday’s hearing, said the new rates will represent 30 percent of her household’s income.
“Last year, we had a 20 percent increase and we just couldn’t pay,” Melody said. “So we went from a $500 deductible to a $1,000 deductible. Now, it’s still going up again this year.”
Moya and her husband, carpenter Kim Radsliff, have seen rate increases from Blue Cross Blue Shield NM every year since 2004, when they paid $562 per month, she said. That represented about 16 percent of their household income.
Now, with the increase approved today, they will pay $1,305 per month — 30 percent of their household income, Melody said.
“As far as I’m concerned, they’re a profit-making business,” Melody said. “We’re self-employed and don’t have a choice except to have no insurance at all.”
NMI’s Trip Jennings contributed to this story.
New Mexico’s Open Meetings Act is meant to help ensure public involvement and to prevent backroom deals in state and local government, but violations of the law are widespread, an investigation by The Independent has found. School boards, universities, town councils, county and state commissions, and boards across the state have broken the law, casting a shroud of secrecy over government officials’ deliberations and bargaining.
On Friday night I got a chance to sit down separately with two candidates for the Public Regulation Commission — the Green Party’s Rick Lass and Democrat Jason Marks — for KNME’s “New Mexico In Focus.”
