397 Mass. 117 | Mass. | 1986
Blue Cross of Massachusetts, Inc., and Blue Shield of Massachusetts, Inc., seek a review of a decision of the Commissioner of Insurance (commissioner) disapproving filings proposing an increase in nongroup rates. On appeal Blue Cross and Blue Shield argue that the commissioner’s decision contains several errors of law and is based upon findings which are unsupported by substantial evidence. We affirm.
On January 2, 1985, Blue Cross and Blue Shield filed proposed revised rates for nongroup subscribers to be effective May 1, 1985, seeking a composite rate increase of 11.5 per cent for Blue Cross and 3.8 per cent for Blue Shield.
1. Standard of review. In this type of proceeding, the commissioner does not set rates but instead is empowered to review proposed rates. G. L. c. 176A, § 6. G. L. c. 176B, § 4. See Massachusetts Ass’n of Older Ams. v. Commissioner of Ins., 393 Mass. 404, 407 (1984). Compare G. L. c. 176A, § 10 (1984 ed.). Contrast G. L. c. 175, § 113B (1984 ed.) (commissioner shall fix and establish automobile insurance rates). No proposed rates can be approved if they are “excessive, inadequate or unfairly discriminatory.” G. L. c. 176A, § 6. G. L. c. 176B, § 4. Further, under G. L. c. 176B, § 4, the commissioner may not approve proposed rates if the benefits provided are “unreasonable in relation to the rate charged.” The commissioner “may not require that [rates] be at the figures he finds reasonable.” Massachusetts Medical Serv. v. Commissioner of Ins., 344 Mass. 335, 339 (1962). See Massachusetts Ass’n of Older Ams. v. Commissioner of Ins., supra at 407 & n.6. The commissioner must give deference to proposed rates so long as they fall within a range of reasonableness. Id. But the burden is on the insurers to furnish evidence which enables the commissioner to establish a range of reasonableness, Massachusetts Ass’n of Older Ams., supra at 407-408, Liberty Mut. Ins. Co. v. Commissioner of Ins., 366 Mass. 35, 42 (1974), and “[t]he statute does not require the commissioner to approve elements of filings which would lead to rates falling within a range of excess, no matter how small.” Workers’ Compensation Rating & Inspection Bureau v. Commissioner of Ins., 391 Mass. 238, 264 (1984).
Our review must accord “the deference due the commissioner’s specialized knowledge, technical competence, and experience, regarding issues within the scope of his statutorily delegated authority.” Workers’ Compensation Rating & Inspection Bureau, supra at 246. See Massachusetts Ass’n of Older Ams., supra at 414.
Review pursuant to G. L. c. 176B, § 12, is limited to whether there is reasonable support in the evidence for the commissioner’s findings. The standard of review to be applied to such a determination is the same under G. L. c. 176B, § 12, as under G. L. c. 176 A, § 6. Massachusetts Ass’n of Older Ams., supra at 409. It is axiomatic that we retain the power to review the commissioner’s decision for errors of law and to insure that his decision is in accordance with law under G. L. c. 176B, § 12.
2. Substantial evidence. Blue Cross argues that the commissioner’s disapproval was not based on substantial evidence to the extent he found “unsupported inconsistencies” in the Blue Cross filing. The thrust of the argument is that the commissioner relied on the testimony of a witness, nonexpert in the particular area in question, to disapprove the filing. Blue Cross argues that this violates the substantial evidence test because it was “contrary to the recommendations of all experts who testified at the hearing.” Medical Malpractice Joint Underwriting Ass’n v. Commissioner of Ins., 395 Mass. 43, 55 (1985), quoting Massachusetts Auto. Rating & Accident Prevention Bureau v. Commissioner of Ins., 362 Mass. 43, 46 (1972). A review of the facts underlying the issue demonstrates the fundamental error in this position.
Blue Cross originally projected a decrease in nongroup incidence for 1985 and 1986, compounded, between 5.9 per cent and 8.0 per cent. It projected decline in total incidence for the same period compounded to 6.4 per cent. Thus, Blue Cross based its original filing on the factual assumption that nongroup incidence could decline faster than total incidence. After an employee of the Rate Setting Commission (R.S.C.) testified, a Blue Cross actuary revised the estimate for total incidence compounded to 10.7 per cent. Blue Cross did not adjust the estimates for nongroup incidence, however. The R.S.C. employee testified that reliance on the original estimate for non-group incidence was “inherently wrong” and went on to testify that there was no evidence to justify revision of the total incidence without revising nongroup incidence as well.
The commissioner noted the “selective revisions” made to the original projection, and pointed out that the revised estimate increased the Blue Cross nongroup rate but did not provide any “evidence to support [the] reversal in its [initial] assumption about the relative magnitude of rates of decline in total hospital days and nongroup incidence.” As he pointed out, Blue Cross “went from assuming that the decline in nongroup incidence
Blue Cross’s reliance on Medical Malpractice Joint Underwriting Ass’n, supra, is misplaced. In that case we rejected rates fixed by the commissioner because the necessary substantial evidence test was not met, although we were critical of the commissioner’s decision to combine “different rate components proposed by various expert witnesses to arrive at a lower insurance rate than any of these experts proposed.” Id. at 55. We held that that method of computation was not “by itself sufficient proof that his decision was not based on substantial evidence in the record.” Id. at 56. The statutes circumscribing the commissioner’s discretion in that case required the rates fixed by the commissioner to be “actuarially sound” and “self-supporting.” Id. at 57. See St. 1975, c. 362, § 6. Thus, we required only that if the commissioner sets rates below a level suggested by every actuarial expert, he “must clearly demonstrate that each selected rate component is truly independent and is supported by substantial evidence.” Id. at 57. What was lacking there was “greater specificity in [the] administrative findings and conclusions.” Id. Thus, we did not categorically rule out the possibility that the commissioner could set rates which no actuarial expert supported.
Essentially, Blue Cross would have us hold that if it can marshal its experts unanimously to one position, and if no expert testifies to the contrary, then the commissioner must err for lack of substantial evidence if he finds against the consensus of the experts. That position is untenable. Since the burden is on Blue Cross to provide the commissioner with
In both Insurance Rating Bd., supra, and Aetna Casualty & Sur. Co., supra, we held that “[u]nder the statutes each type of automobile insurance coverage must be considered and treated separately from all others. ” Insurance Rating Bd., supra at 116. See Aetna Casualty & Sur. Co., supra at 280. We specifically applied this principle to investment income. Insurance Rating Bd., supra. Assuming, without deciding, that similar statutory construction is warranted in this context, we. nevertheless conclude that the commissioner’s disapproval of Blue Cross’s and Blue Shield’s proposed rates was not an error of law.
Blue Cross and Blue Shield sought “to follow their usual practice of crediting to nongroup subscribers the investment income earned from nongroup premium and claims reserves.” Also in accordance with prior practice, they did not credit nongroup subscribers with investment income from general reserves (by agreement with group subscribers those subscribers do not receive a general reserve investment credit either). In requiring Blue Cross and Blue Shield to alter their prior practice, the commissioner found that nongroup subscribers are entitled “to be[ ] credited . . . with their share of total investment income” (emphasis added). Blue Cross and Blue Shield base their argument of unlawful subsidization on the fact that in 1975 their general reserves were exhausted and that since 1975 nongroup lines have recorded a net operating loss. From this they conclude that none of the general reserves
The commissioner’s decision was nonetheless correct, and not inconsistent with the principles enunciated in Insurance Rating Bd., supra, and Aetna Casualty & Sur. Co., supra. In his order, the commissioner affirmed “the obligation of non-group subscribers to contribute their share to maintain a reasonable level of [Blue Cross/Blue Shield] reserves . . . .’’In fact, the Blue Cross and Blue Shield filings included a charge for reserve contributions. If nongroup members pay their fair share of reserve contributions then they may be credited with investment income from general reserves.
5. St. 1984, c. 199. Blue Cross and Blue Shield challenge the commissioner’s finding that neither Blue Cross nor Blue Shield had shown that their cost control programs would have a “demonstrated impact” on the prevention of reimbursement for medically unnecessary services.
In his decision, the commissioner noted that c. 199 requires that cost containment activities must be “acceptable to him.” St. 1984, c. 199. He enunciated the meaning of that phrase: “The standard of acceptability requires that I judge the soundness, scope and adequacy of [Blue Cross/Blue Shield] utilization review and cost containment activities.” In passing on the “specific techniques” used, he looked at “both the extent of reimbursement of unnecessary services and the range of available utilization review and cost containment techniques.” He further stated, “The scope and results of [Blue Cross/Blue Shield] programs must be measured against the opportunities which exist for improvement.”
Here, the commissioner’s own interpretation of the statute makes clear that he does not have unfettered discretion and that no improper delegation has been made. First, the discretion granted by the phrase “acceptable to him” is strictly limited to review of utilization review programs and techniques. Second, as the commissioner correctly perceived in his analysis of the standards he would employ under that phrase, the phrase “acceptable to him” is importantly modified by the standard of “demonstrated impact.” In enunciating the various standards he would use for review under the “acceptable to him” phrase, the commissioner clearly construed his authority in light of the general, but clear, “demonstrated impact” standard. In enacting St. 1984, c. 199, the Legislature appropriately delegated the power to explicate the details of the “demonstrated impact” standard to the commissioner: the commissioner recognized this and did not exceed the bounds of that delegation.
Blue Cross next argues that the commissioner cannot reject utilization review provisions which are part of the agreement which it negotiated with hospitals. Were this contention to succeed, the commissioner would be obliged to approve whatever cost containment methods Blue Cross, Blue Shield and the hospitals agree upon. Such an interpretation does not pass careful scrutiny. The hospital agreement was reviewed and approved by the R.S.C., which has express statutory authority to approve “any rate of payment... if such rate, in the opinion of the commission, contains an incentive to achieve greater efficiency and economy in the manner of providing health care services without adversely affecting the quality of such services.” G. L. c. 176A, § 5 (1984 ed.).
Blue Cross utterly misconceives the statutory harmony which exists between G. L. c. 176A, § 5, and G. L. c. 176A, § 6. Under G. L. c. 176A, § 6, the commissioner approves and disapproves rates charged to subscribers and must make the appropriate findings under St. 1984, c. 199. Under G. L. c. 176A, § 5, the R.S.C. approves or disapproves rates of payment to providers as set out in contracts authorized by that section: rates of payment which provide incentives for greater efficiency and economy which do not adversely affect the quality of services may be approved. The R.S.C. is nowhere authorized to approve rates for subscribers, which is the commissioner’s prerogative, and thus is not empowered to make a finding pursuant to St. 1984, c. 199. Moreover, the R.S.C. does not have to make an efficiency and economy finding vis-a-vis contracts with providers at all — it is merely authorized
Since the commissioner’s disapproval was based on substantial evidence, was not arbitrary or capricious, and was not in excess of statutory authority, or based on errors of law, a judgment is to enter in the Supreme Judicial Court for the county of Suffolk affirming his decision.
So ordered.
A subsequent revision reduced the proposed revised rates for Blue Cross to a composite increase of 9.9 per cent.
We again reserve decision on whether G. L. c. 30A applies to proceedings under G. L. 176B, § 4. See Massachusetts Ass’n of Older Ams. v. Commissioner of Ins., 393 Mass. 404, 409 n.10 (1984). However, the standards of G. L. c. 30A do apply for judicial review under G. L. c. 176A, § 6. Although G. L. c. 176B, § 12, may or may not impose broader standards of review we hold that for purposes of this case it does not.
To arrive at a figure which represents cost per patient, namely, one which can translate into an individual rate, nongroup incidence is calculated on the basis of incidence per 100 contracts.
General Laws c. 6A, § 53 (1984 ed.), requires hospital charges to be uniform for all patients. Thus, there is no need to calculate average cost per day for nongroup subscribers separately.
The commissioner did not rely specifically on the testimony of the R.S.C. employee, but rather “on the record before him.”
Thus, it is immaterial whether the R.S.C. witness was an expert for purposes of testifying as to the inconsistencies in the Blue Cross filing. The commissioner’s decision was neither required to be, nor was it in fact, premised exclusively upon that testimony. See note 5, supra.
If total incidence declines faster than nongroup incidence, nongroup rates will be higher than if total incidence and nongroup incidence decline at the same rate, or if nongroup incidence declines faster than total incidence.
Since Blue Cross misconstmed our decision in Medical Malpractice Joint Underwriting Ass’n v. Commissioner of Ins., 395 Mass. 43 (1985), it failed to adequately address the scope of review issue in this case. While we hold that the commissioner appropriately disapproved the Blue Cross filing for failure to meet its burden of proof, we do not expressly rely on either the “substantial evidence” or the “arbitrary or capricious” standard exclusively. Although an incomplete, inconsistent, or otherwise inadequate rate proposal is itself substantial evidence or the basis for substantial evidence for a disapproval — since the commissioner can infer what is lacking from what is in evidence — this would often have the absurd consequence that substantial evidence for a commissioner’s decision would be the fact, infer-able from the evidence, that there was not enough evidence, or that the evidence is inconsistent. It may be the case, though we do not reach this issue, that such decisions by the commissioner in rate approval cases are best tested under the “[arbitrary or capricious, abuse of discretion, or otherwise not in accordance with law” standard. A decision to disapprove proposed rates for failure to meet the burden of proof is less an evidence issue than an issue of applying a standard of law to test the sufficiency of proof. It may be preferable to understand our review in such cases as one testing whether the commissioner has arbitrarily or capriciously overlooked
In its reply brief, Blue Shield argues that Workers’ Compensation Rating & Inspection Bureau v. Commissioner of Ins., 391 Mass. 238 (1984), should be distinguished on the ground that that case applies the range of reasonableness test to elements of filings, not over-all rates. It is obvious, however, from the underscored language that we did, and do, intend our holding to apply to over-all rates.
No one questions, and we do not pass upon, the propriety of a scheme of general reserves under the applicable statutes.
Of course, rates which systematically subsidize one line of insurance at the expense of another, by definition, do not fairly distribute the cost of maintaining adequate reserve. No such challenge is present here.
Statute 1984, c. 199, § 2 and §§ 5 and 6, amended G. L. c. 176A, § 6, and G. L. c. 176B, § 4, respectively, to require the commissioner to make a finding in rate approval hearings that Blue Cross and Blue Shield “employ!] a utilization review program and other techniques acceptable to him which have had or are expected to have a demonstrated impact on the prevention of reimbursement by such corporation[s] for services which are not medically necessary.”
No issue is raised in this case regarding the proper exercise of the delegated authority via rule making or adjudication.
The record does not reflect whether or not a specific finding was made by the R.S.C. under this segment of § 5. Thus no issue of collateral estoppel has been raised.
That assumes, of course, that even in this scenario Blue Cross is truly whipsawed. There is no need to discuss, in the context of this case, the differences between G. L. c. 176A, §§ 5 and 6, that might make an affirmative positive finding under § 5 and an affirmative adverse finding under § 6 consistent.