> Dirigo Health Filing

STATE OF MAINE
DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
BUREAU OF INSURANCE

The Superintendent of the State of Maine Bureau of Insurance hereby requests that the Dirigo Health agency Board of Director’s (“Dirigo”) respond to the following inquiries and document requests. In producing the requested information, Dirigo shall furnish all information regardless of whether it is in the possession of Dirigo or any of its consultants, experts, or agents. If Dirigo refuses for any reason to provide any of the information requested, Dirigo must identify and describe the reason for such refusal.

Dirigo shall consider this information request continuing in nature so as to require the production of all documents and information responsive to any item included in this request produced by or on behalf of Dirigo or obtained by Dirigo or its consultants, experts, or agents and, furthermore, Dirigo must supplement the responses provided should the information change or more information become available at any time during the pendency of this proceeding.

1. Please provide the following information electronically, in Excel or text file format, by hospital for each hospital in Maine for the years 2000-2004:

a.) Inpatient Gross Patient Service Revenues (Medicare, MaineCare, Other).
b.) Outpatient Gross Patient Service Revenues (Medicare, MaineCare, Other).
c.) Inpatient Discharge total (including newborns) (Medicare, MaineCare, Other).
d.) Case Mix Index based on all-payer claims using Medicare grouper (from MHDO as referenced in report).
e.) Medicare Cost Report Worksheet C, Column 1.
f.) Hospital Operating Margin and components for calculation (operating revenue and operating expense and all detail required for any exclusions or adjustments).
g.) Bad Debt/Charity Care.

These should be provided in the fiscal year groupings native to their data sources, with those fiscal year periods indicated.

2. Please provide the following work papers electronically, in Excel or text file format:

a.) Spreadsheet provided by MHA to Dr. Kane.
b.) State Provider Tax amounts by hospital.
c.) Source data and all calculations for HMBI statistics displayed in report.
d.) All spreadsheets and calculations used to generate the estimates summarized in the CMAD and COM reports.

3. Questions related to Voluntary Underwriting Gain

A. How does Dirigo differentiate between: (a) the normal increases and decreases in underwriting margin over time that are a characteristic of a highly cyclical industry, and (b) savings that are created by the actions of Dirigo?

B. Should the true IBNR be substituted for the reported IBNR in determining the underwriting gain, since there is reporting of the adequacy of the December 2004 IBNR in each subsequent quarterly filing throughout 2005? Please explain.

C. How should the methodology deal with quota share reinsurance which has a significant impact on the premium and claim volumes that are reported in the Statement of Revenue and Expenses, but minimal impact on the underwriting gain (in dollars)?

D. Which is a more meaningful measure of the impact of underwriting margin on the price paid by a policyholder:

(i) underwriting margin as a percent of direct (gross) premium revenue; or
(ii) underwriting margin as a percent of a net (of ceded reinsurance) revenue?

E. Why were the federal employees included in the calculations? Are they explicitly excluded by the statute? Please explain.

F. If the projected underwriting margin for the life of a multi-year contract is negative, it may be necessary to establish a premium deficiency reserve. Should the savings to policyholders, due to negative margins projected for the life of the contract, be allocated over the entire period of the multi-year contract or to the year in which the required premium deficiency reserve is established? Please explain.

G. Why did Dirigo take only the fractional portion of the year 2000 and ignore the results for BCBSME in the first 5 months? Please explain.

H. Please explain the basis for the statement in Mercer’s Final Report that in the Blue (Life & Health) and Yellow (Property and Casualty) Blanks, individual health insurance would be recorded as Collectively Renewable. Is this consistent with the NAIC Annual Statement Instructions? Please explain.

The Superintendent directs Dirigo to respond to this information request no later than 3:00 p.m. on October 11, 2005. Should Dirigo require any clarification with respect to any request being made, it may contact my legal counsel, Thomas Sturtevant, Assistant Attorney General.

> Dirigo Health Filing