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In re MVP Health Insurance Co.

Supreme Court of Vermont

September 23, 2016

In re MVP Health Insurance Company

         On Appeal from Green Mountain Care Board Alfred Gobeille, Chair

          Gary F. Karnedy and Kevin M. Henry of Primmer Piper Eggleston & Cramer PC, Burlington, for Appellant.

          William H. Sorrell, Attorney General, Bridget Asay, Solicitor General, and Elizabeth M. Tisher, Assistant Attorney General, Montpelier, for Appellee Green Mountain Care Board.

          Lila Richardson and Kaili Kuiper, Vermont Legal Aid, Inc., Montpelier, for Appellee Office of the Health Care Advocate.

          PRESENT: Reiber, C.J., Dooley, Skoglund and Eaton, JJ., and Teachout, Supr. J., Specially Assigned.

          DOOLEY, J.

         ¶ 1. This case arises out of the rate filing submitted to the Green Mountain Care Board (GMCB) by MVP Health Insurance Company (MVP) with respect to the Agri-Services health insurance plan. Acting through its authority to review and approve or deny health insurance rates in the State of Vermont, GMCB found that the 2015 Agri-Services rate filing would not promote access to quality health care and denied it on that basis. MVP appeals, arguing that GMCB's disapproval was an arbitrary use of discretion based on vague standards that unconstitutionally delegated authority to GMCB, that GMCB's decision is not supported by the record, and that GMCB's statutory interpretation of its authority is compelling error. We hold that 8 V.S.A. § 4062 is constitutional but find that GMCB's conclusions were not supported by specific findings on the statutory criteria required for approval of health insurance rates and, accordingly, reverse and remand for new findings consistent with this opinion.

         ¶ 2. Agri-Services is an association for farmers that provides a health insurance plan to its members. This plan is provided through MVP, a New York corporation that provides health insurance in Vermont and New York. Agri-Services has a minimum premium plan, under which Agri-Services pays its own claims up to 115% of expected claim liability, and MVP provides administrative services and stop-loss coverage at a pooling level of $200, 000. At the time of GMCB's review, Agri-Services offered five health plans that covered 1220 of its members for one full year beginning December 2015.

         ¶ 3. As per 8 V.S.A. § 4062(a)(1), an insurer may not deliver or issue for delivery a health insurance policy in Vermont until a copy of the policy's premium rates is filed with GMCB and GMCB has issued a decision approving, modifying, or disapproving the proposed rate. GMCB "shall determine whether a rate is affordable, promotes quality care, promotes access to health care, protects insurer solvency, and is not unjust, unfair, inequitable, misleading or contrary to the laws of this State." Id. § 4062(a)(3). In rendering its decision, GMCB "shall consider the analysis and opinion provided by the Department of Financial Regulation" regarding the impact of the proposed rate on the insurer's solvency and reserves. Id. § 4062(a)(2)-(3).

         ¶ 4. In July 2014, MVP submitted its 2014 Agri-Services filing, allowing GMCB to conclude its ninety-day review, and the carrier to provide at least thirty days' notice to affected members of an approved rate change prior to its December 1 effective date. At the time of its 2014 rate filing, Agri-Services advised GMCB that it would discontinue its policies in Vermont and that its members would purchase future coverage through Vermont Health Connect. GMCB maintains that it premised its approval of Agri-Services' 2014 rate filing, including an increase of 14.9%, on MVP's confirmation that the filing would be its last and that members would be notified that they would need to enroll in a plan through Vermont Health Connect for 2015.

         ¶ 5. In 2015, MVP did not submit its Agri-Services Association Rate Filing to GMCB until September 9. In its filing, MVP requested a 26.9% average annual rate increase. GMCB submitted the filing to its actuaries, who reviewed it. On October 30, 2015, Agri-Services notified its members of the rate increase, stating that the increase was "pending approval." Agri-Services told members that those who did not terminate coverage would be billed at the preexisting premium rate until new rates were determined, and that they would be retroactively billed at the new premium rates once they were finalized. Subsequently, Agri-Services advised members that they could terminate their coverage and enroll in Vermont Health Connect, but must do so no later than December 15, 2015, for coverage beginning on January 1, 2016.

         ¶ 6. During the course of actuarial review, an error was discovered in MVP's rate calculation, and MVP submitted a revised filing on November 3, 2015, requesting an average annual rate increase of 27.4%. MVP used claims made from May 1, 2014, through April 30, 2015, and paid through June 30, 2015, to develop its proposed rates. MVP projected the base period claims, minus claims in excess of $200, 000, forward to the ratings period using an annual effective medical cost increase trend of 6.6% and prescription drug cost increase trend of 17.5%, and then adjusted the projected claims to account for a 2.7% stop-loss fee. No adjustment was made for demographic changes and premium cost was increased to account for operating expenses of 15.9%, including general administrative expenses of 9.75% and a 1% contribution to surplus. GMCB found that the proposed rate increase of 27.4% resulted from observed claim trends that had "far outpaced premium increases, " with observed cost increase trends of 30.4% for medical and 55.8% for prescription drug costs for a total cost increase of 32.6%. After reviewing the rate filing, GMCB's actuaries recommended that GMCB calculate a single conversion factor and demographic factor based on Agri-Services' most recent enrollment distribution, which would reduce the rates by approximately 0.9%, and use Agri-Services' specific experience to calculate its projected medical and prescription drug trends, reducing the medical cost increase trend from 6.6% to 6.4% and the pharmacy cost increase trend from 17.5% to 17.1%. These two adjustments would decrease the rate increase to 25.9%. While the actuaries noted that some members would experience "undoubtedly a significant increase" if the filing was approved, they concluded that the proposed rates were not excessive, inadequate, or unfairly discriminatory. The Office of the Health Care Advocate (HCA), on the other hand, recommended that GMCB disapprove or modify the rate request to make it "as affordable as possible." MVP requested that GMCB reject the actuaries' recommendations and approve the rates as originally filed.

         ¶ 7. The parties waived a hearing pursuant to GMCB Rule 2.000 and filed memoranda arguing their position in lieu of a hearing. In considering the parties' requests, GMCB noted that the rate increases proposed by MVP were higher than any previously approved by the Board. Furthermore, GMCB noted that it had premised its approval of Agri-Services' 14.9% rate increase in 2014 on MVP's confirmation that the 2014 rate filing would be Agri-Services' last. GMCB criticized the tardiness of MVP's filing, noting that by filing as late as September 9 it left the Board insufficient time to complete its ninety-day review before a December 1 effective date, making it impossible for Agri-Services to comply with GMCB Rule § 2.2405 and notify its members of the rate increase thirty days or more prior to the increase taking effect. MVP's error in filing further compounded the problem by delaying review even more, meaning that GMCB's review could not commence until after its revised filing was submitted in November. Furthermore, GMCB found that MVP improperly characterized the Agri-Services plans as "transitional, " a designation which no longer exists in the State of Vermont. GMCB noted that no evidence in the record suggested that Agri-Services had ever notified its members that their plans would no longer be renewed, as they had represented would happen in their 2014 rate filing. Taken together, GMCB found that the tardiness of the filing, and the confusion over whether or not the previous year's filing would be the last for this plan, demonstrated a "lack of accountability, " leading GMCB to conclude that the proposed rates "did not promote access to quality health care and are unfair, unjust and inequitable."

         ¶ 8. MVP filed a motion for reconsideration on January 11, 2016, which GMCB denied on January 21. MVP appealed.

         ¶ 9. On appeal, MVP makes the following alternative arguments: (1) GMCB's disapproval constituted an arbitrary exercise of discretion based on vague statutory standards that unconstitutionally delegated legislative authority to GMCB; (2) GMCB improperly disapproved the rate filing on grounds not supported by the record; and (3) GMCB's decision is based on an erroneous interpretation of its statutory grant of authority. We conclude that 8 V.S.A. § 4062 is constitutional but agree that GMCB's conclusions were not supported by specific findings on the statutory criteria ...

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