Document 475 : Docket No. 99-14 : Hearing Decision : Bureau of Insurance

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

In Re:

Application of Associated Hospital Service of Maine d/b/a Blue Cross and Blue Shield of Maine to convert to a Stock Insurer

and Voluntarily Liquidate and Dissolve

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and

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BCBSME’s Memorandum in Opposition to Consumers for Affordable Health Care’s Motion to Compel Additional Discovery Responses

In Re:

Application of Anthem Health Plan of

Maine, Inc. to Acquire the Assets of Associated Hospital Service of Maine d/b/a

Blue Cross and Blue Shield of Maine and

Related Transactions

Docket No. INS-99-14

(CONSOLIDATED)

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Consumers for Affordable Healthcare Coalition ("CAHC") has asked the Superintendent to order BCBSME to supplement four of its responses to CAHC’s discovery requests – Request #’s 1, 7, 24, and 39. These requests – and BCBSME’s responses to them – are attached to this document.

Concerning one of these requests – Request # 24, relating to BCBSME’s medical underwriting practices – BCBSME has today served a supplemental response that should moot the motion as to this request. Regarding the remaining requests – Request #’s 1, 7 and 39 -- BCBSME believes that its answers are sufficient, and that no further response is needed or warranted.

Request #’s 1 and 7 should be viewed together. Both seek information relating to BCBSME’s decision to concentrate its search for affiliation partners on companies that already had a Blue Cross Blue Shield Association ("BCBSA") affiliation. BCBSME’s response identified the rationale for this approach, and provided documents that describe the formidable obstacles that a firm not currently a BCBSA affiliate must navigate in order to be allowed to use the Blue Cross trademarks for its insurance products.

Insofar as CAHC‘s motion to compel is based on the notions that these documents do not by their terms contain restrictions that would absolutely prohibit a firm not affiliated with the Blue Cross Association from acquiring the assets of BCBSME or the stock of a converted BCBSME, the argument rests on a false premise. BCBSME does not contend that it was legally prohibited from conveying its assets to a firm unaffiliated with the Blue Cross Association. However, BCBSME’s board made the judgment – one for which it had the assistance of expert investment banking advice – that the assets of BCBSME would likely be assigned a higher value by a BCBSA affiliate, for the reasons indicated in the response to Request # 7.

The documents produced by BCBSME in response to these requests reflect the restrictions that a non-BCBSA-affiliated would-be acquirer would have to negotiate, and thus respond directly to the issue of why a non-BCBSA affiliate would assign a lower value to the BCBSME assets than a BCBSA affiliate.

Concerning the remaining request at issue -- Request # 39 – BCBSME’s response (attached to the motion) is also complete. The response included statistics on appeals and coverage changes as a result of appeals. The response also enumerates and references the externally developed standards in the manuals that govern care determinations.

The standards that BCBSME currently uses to manage its case administration services is several levels of relevance removed from the central issues in this proceeding.. BCBSME nevertheless provided the information in response to CAHC’s requests in the same spirit that it has approached all discovery requests – to be as co-operative as possible, consistent with a need to maintain confidentiality for competitively sensitive business information. The level of detail that BCBSME should provide has been and should be proportional to the relevance of the issue. Judged by this standard, the response to CAHC Request # 39 provided on February 18 should be deemed more than sufficient.

Date: February 29, 2000

________________________

Robert S. Frank

HARVEY & FRANK

Two City Center

Suite 402

Portland, Maine 04112-0126

(207) 775-1300

Attorneys for BlueCross Blue Shield of Maine

Please provide all documents prepared by or for the Blue Cross and Blue Shield Association and its predecessors relating to its rules, practices, policies, procedures, Articles of Incorporation, and bylaws of the said Association.

Response:

See Document #’s:

B 11245-11293 (BCBSA licensing standards);

B 11025-11045, which refer to the status of BCBSME’s compliance with BlueCross Blue Shield Association standards since 1995.

See also B 04159-04202, B 06813, 06816 (previously produced).

The information contained in a portion of these documents is deemed

CONFIDENTIAL RESPONSE PURSUANT TO PROTECTIVE ORDER

Please provide all documents prepared by or for the Blue Cross and Blue Shield Association that support the contention by BCBSME that BCBSME could not have opened the bidding process to a company outside of the Blue Cross and Blue Shield Association.

Response:

This question has an incorrect premise. There was no prohibition on BCBSME’s entertaining bids from companies that were not members of the BCBSME. However, in the judgment of BCBSME’s board and management, restrictions on the ability of a non-Blue Cross trademark licensee to acquire the Blue Cross and Blue Shield of Maine trademarks, or to succeed to BCBSME contracts with BlueCross BlueShield of Minnesota, substantially reduced the value of BCBSME for a non-member affiliate as compared to a member affiliate.

See Document Nos. B 11245-11293 (BCBSA licensing standards).

Please provide a chart that describes in detail the medical underwriting practices and/or criteria used by the applicants by product and by item or service. Please include in the chart all waiting periods, exclusions of services and items, exclusionary periods, rate and rating variations which are dependent on age, sex, health status and medical condition, used or in effect for each of the calendar years 1997, 1998, 1999 and 2000.

Original

Response:

See Document #’s B 11080-89 ; B 11177- 11124.

Supplemental Response of February 29, 2000

Blue Cross and Blue Shield of Maine applies a standard of review when investigating the existence of pre-existing conditions on both group and non-group products. Members who are subject to the pre-existing condition exclusion will not have any benefits during the pre-existing condition exclusion period for the condition(s) that are determined to be pre-existing. A pre-existing condition determination is not dependent on the age, sex, existing health status, rates or rating variation of a member. The maximum length of a pre-existing condition exclusion is twelve months for both group and non-group coverage. Credit for pre-existing condition exclusions is granted if a member has had prior coverage and has fulfilled a portion or all of their pre-existing condition exclusion period with another carrier.

Prior to July 1997, a pre-existing condition was determined with medical documentation obtained twelve months prior to the effective date supporting signs and/or symptoms and/or treatment of the condition in question. Effective July 1, 1997, the Health Insurance Portability and Accountability Act (HIPAA) was instituted. This allowed medical records to be requested six months prior to the effective date for group products. A diagnosis is determined to be pre-existing for group coverage if the member had received a medical diagnosis of the condition by a medical provider, or sought medical treatment for signs and /or symptoms of the condition by a medical provider or was advised to receive treatment by a medical provider six months prior to the effective date even if the diagnosis of the condition has not yet been determined. A diagnosis is determined to be pre-existing for non-group coverage if the medical record provides evidence of signs and /or symptoms of the diagnosis existing during the twelve months prior to the effective date or if the medical record provides evidence that medical advice was given, a diagnosis made, care or treatment for that diagnosis recommended or received during the preceding twelve months from the effective date. Effective July 1, 1999, the effective date of coverage for group products is the earlier of the date on which the insured’s policy is effective or the first day of the waiting period imposed by the insured’s employer. A pre-existing condition determination for non-group coverage is dependent on the date of receipt of the insured’s application for coverage.

An exclusion may not be imposed relating to pregnancy on group products. A routine preventative screening or test yielding only negative results may not be deemed to be diagnosis, care or treatment. Genetic information may not be used as the basis for imposing a pre-existing condition exclusion in the absence of a diagnosis of the condition relating to that genetic information.

Please provide all documents prepared by or for the applicants related to criteria used or in effect for the purpose of determining whether someone qualifies and/or continues to qualify for case management services for each of the calendar years 1998 and 1999. Please provide the aggregate number of case management services requested and the aggregate number of case management services denied by the applicants during those two years. How many of those denials were appealed to the applicants? How many were reversed on appeal by the applicants? Please provide one redacted copy of an Anthem decision and one redacted copy of a BCBSME decision denying case management services for each of the calendars years 1998 and 1999.

Original Response:

See Document #’s B 11207-B 11233.

Supplemental Response of February 18, 2000

Understanding that term "case management services" relates to BCBSME’s hospital case management activity that determines appropriateness of treatment setting and level of care within an inpatient admission, BCBSME does not track denial activity within the scope of its our catastrophic, maternity, and disease case management interventions. This data is available is for BCBSME business only, not MPHP nor CMPHP.

Hospital Case Management Activity	1998	1999
Total # of Hospitalizations	13,371	10,844
Total # of Hospitalizations that resulted in a denied day	185	217
Total # of Level One Appeals	93	116
Total # of Appeals resulting in a different decision	11	35

Medical Guidelines used for hospital case management :

Milliman & Robertson HealthCare Management Guidelines, Inpatient Medical/Surgical Care, Vol.1 , Version 1996 (used during 1998); Milliman & Robertson HealthCare Management Guidelines,

Inpatient Medical/Surgical Care, Vol.1 , Version, 1997(used during 1999)

CERTIFICATE OF SERVICE

The undersigned hereby certifies that on March 3, 2000, a copy of BCBSME’s Memorandum in Opposition to Consumers for Affordable Health Care’s Motion to Compel Additional Discovery Responses was served by United States mail, first class postage prepaid, or, where indicated, by hand delivery, on each of the persons listed below.

James B. Zimpritch

Pierce Atwood

One Monument Square

Portland, Maine 04101

e-mail: jzimpritch@pierceatwood.com

Judith Chamberlain, Esq.

State of Maine

Department of the Attorney General

6 State House Station

Augusta, Maine 04333-0006

e-mail: judy.chamberlain@state.me.us

(Bureau of Insurance)