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Inc. v. Highmark, Inc.

United States District Court, W.D. Pennsylvania

August 15, 2017

COLE'S WEXFORD HOTEL, INC., on its own behalf and on behalf of all others similarly situated Plaintiffs,
v.
HIGHMARK, INC., Defendant.

          ORDER

          Joy Flowers Conti Chief United States District Judge.

         I. Introduction

         Pending before the court in this antitrust action is a motion for summary judgment (ECF No. 455) filed by defendant Highmark, Inc. (“Highmark”). According to Highmark, the undisputed facts of this case show that the injury complained about by plaintiff Cole's Wexford Hotel, Inc. (“Cole's Wexford”) on its own behalf and on behalf of all others similarly situated “is the direct result of Highmark's constitutionally protected right to petition Pennsylvania legislative and regulatory bodies to be permitted to offer small group health plans through its affiliate, …[Highmark Health Insurance Company (“HHIC”)], and the strictly qualified approvals that Highmark received from those governmental entities to offer those small group plans.” (ECF No. 455 at 1.) Highmark argues that-under those circumstances-the court should grant summary judgment in its favor because Cole's Wexford's claims are barred by the Noerr-Pennington doctrine. (Id. (citing United Mine Workers v. Pennington, 381 U.S. 657 (1965); E. Rr. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961).) Highmark argues that even if Cole's Wexford's claims are not barred by the Noerr-Pennington doctrine, the undisputed facts of this case show that “the filed rate doctrine prevents Cole's Wexford from recovering damages from July 1, 2010 through June 30, 2011.” (ECF No. 455 at 1-2 (citing McCray v. Fid. Nat'l Title Ins. Co., 682 F.3d 229 (3d Cir. 2012).)

         Based upon the court's review of Highmark's motion for summary judgment, the parties' submissions related to that motion, and the applicable law, Highmark is not entitled to summary judgment. First, Cole's Wexford in the third amended complaint does not allege that any of Highmark's constitutionally-protected conduct caused its injury. Under those circumstances, the Noerr-Pennington doctrine does not provide Highmark immunity from Cole's Wexford's antitrust claims. Second, the record does not show that the Pennsylvania Insurance Department ("PID") had ratemaking authority with respect to the rates HHIC charged to Cole's Wexford during the relevant timeframe. The filed rate doctrine, therefore, does not apply to bar Cole's Wexford's antitrust claims because using those rates to calculate damages will not infringe upon the ratemaking authority of the PID. For those reasons, which are explained fully in this opinion, Highmark's motion for summary judgment will be denied.

         II. Procedural History

         This contentious and litigious case has been pending for nearly seven years. The court set forth detailed recitations of the procedural history of this case in at least three other opinions resolving dispositive motions. (ECF Nos. 240, 284, 301.) The court in this opinion will set forth only the procedural history pertinent to the resolution of the motion for summary judgment (ECF No. 455).

         On October 1, 2014, Cole's Wexford filed a third amended complaint against Highmark and then-defendant UPMC.[1] (ECF No. 286.) Cole's Wexford set forth the following counts against Highmark:

- Count I-Violations of Section 1 of the Sherman Act, 15 U.S.C. § 1;
- Count II-Conspiracy to Monopolize in Violation of Section 2 of the Sherman Act, 15 U.S.C. § 2;
- Count IV-Willful Acquisition and Maintenance of a Monopoly in the Relevant Market for Private Health Insurance in Violation of Section 2 of the Sherman Act, 15 U.S.C. § 2; and
- Count VI -Willful Attempted Monopolization in Violation of Section 2 of the Sherman Act, 15 U.S.C. § 2.

(ECF No. 286.) Highmark and UPMC each filed a motion to dismiss the third amended complaint. (ECF Nos. 288, 290.) On September 1, 2015, the court denied the motion to dismiss filed by Highmark and granted in part and denied in part the motion to dismiss filed by UPMC. (ECF Nos. 301, 302.) The court permitted all claims against Highmark to proceed and denied the request to strike the class allegations from the third amended complaint. (ECF No. 301 at 61.) On November 16, 2015, Highmark filed an answer to the third amended complaint. (ECF No. 314.)

         On August 22, 2016, Highmark filed a motion for hearing and scheduling order for its motion for summary judgment. (ECF No. 424.) The court directed the parties to meet and confer with the special master appointed in this case to oversee, among other things, discovery, in order to develop a discovery plan with respect to Highmark's proposed motion for summary judgment. On November 17, 2016, Cole's Wexford and Highmark filed a joint notice of a proposed discovery schedule for summary judgment briefing. (ECF No. 449.)

         On January 25, 2017, Highmark filed a motion for summary judgment, a brief in support of the motion, a statement of undisputed material facts, and exhibits in support of the motion. (ECF Nos. 455, 456, 457, 458, 459.)[2] On February 24, 2017, Cole's Wexford filed a brief in opposition to Highmark's motion, a response to Highmark's statement of undisputed material facts, its own statement of undisputed material facts, and exhibits in support of its response. (ECF Nos. 470, 471, 472, 473.)[3] On March 10, 2017, Highmark filed a reply brief in support of its motion for summary judgment. (ECF No. 485.) On March 20, 2017, the parties filed a combined concise statement of material facts. (ECF No. 487.)[4]

         III. Factual Background

         The factual background is derived from the undisputed evidence of record and the disputed evidence of record viewed in the light most favorable to the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (“The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.”).

         A. General Background About the Parties

         Highmark is a private, national diversified health care insurer serving members through its businesses in health insurance and through subsidiaries and affiliates which provide health insurance, dental insurance, vision care, and reinsurance. (Combined Concise Statement of Material Facts (“CCSMF”) (ECF No. 488) ¶ 1.) Highmark is part of the Highmark Health enterprise, a diversified health and wellness system. (Id. ¶ 2.) Both Highmark and Highmark Health are Pennsylvania nonprofit corporations with principal places of business in Pittsburgh, Pennsylvania. (Id. ¶ 3.) Highmark is an independent licensee of the Blue Cross and Blue Shield Association that offers and administers health insurance benefit plans in Pennsylvania, West Virginia, and Delaware. (Id. ¶ 4.) One of Highmark's Pennsylvania product service areas is the Western Pennsylvania region, which is a 29-county area consisting of Allegheny, Armstrong, Beaver, Bedford, Blair, Butler, Cambria, Cameron, Centre (part), Clarion, Clearfield, Crawford, Elk, Erie, Fayette, Forest, Greene, Huntingdon, Indiana, Jefferson, Lawrence, McKean, Mercer, Potter, Somerset, Venango, Warren, Washington, and Westmoreland counties. (Id. ¶ 5.) Highmark sells health insurance benefit plans to individuals, small groups, and large groups in Western Pennsylvania. (Id. ¶ 6.) Highmark's products include a variety of commercial indemnity and managed care health insurance products, along with Medicare supplemental and Medicare Advantage products. (Id.¶ 7.) Highmark's Blue Cross plans operate as Hospital Plans, pursuant to 40 Pa. Cons. Stat. §§ 6101-6127. (Id. ¶ 8.) Highmark's Blue Shield plans operate as Professional Health Service Plans, pursuant to 40 Pa. Cons. Stat. §§ 6301-6335. (Id. ¶ 9.) HHIC was a “wholly owned Blue-branded subsidiary” of Highmark that was “domiciled and licensed as a life, accident and health insurer in Pennsylvania.” (Cashion Decl., Ex. 7 (ECF No. 462-1) at 2; CCSMF (ECF No. 488) pl.'s ¶ 9.)[5] HHIC was a for-profit company. (Id. at pl.'s ¶ 10.)

         Cole's Wexford is a Pennsylvania corporation with its principal place of business located in Wexford, Pennsylvania. (CCSMF (ECF No. 488) ¶ 10.) Cole's Wexford seeks to represent a class of those “who purchased small group health insurance coverage from, or otherwise paid any small group plan premiums or portion thereof to, Highmark Health Insurance Co., or a similar for-profit subsidiary of Highmark Inc., between approximately July 1, 2010 and approximately March 21, 2012.” (Id. ¶ 11.) HHIC was Highmark's only subsidiary or affiliate that offered health insurance plans to small groups in Western Pennsylvania and was not subject to express statutory rate-filing requirements during the class period. (Id. ¶ 12.)

         From at least 1998 until June 30, 2010, Cole's Wexford purchased small group health insurance from Highmark. (Id. ¶ 13.) From July 1, 2010, through June 30, 2012, Cole's Wexford purchased small group health insurance from HHIC. (Id. ¶ 14.) Cole's Wexford “exited the group health insurance market” beginning on July 1, 2012, and has not purchased small group insurance or insurance from Highmark or HHIC since that date. (Id. ¶ 15.)

         B. General Background About the Health Insurance Industry

         The PID is an executive agency in the Commonwealth of Pennsylvania that oversees the insurance industry. (CCSMF (ECF No. 488) ¶ 16.) The PID regulated all policies that any insurer issued to individual subscribers in Pennsylvania during all relevant times. (Id. ¶ 17.) Prior to July 1, 2010, the PID regulated all Highmark's health insurance products in Western Pennsylvania, including those offered to small groups, because Highmark operated as a hospital plan corporation and professional health services plan corporation. (Id. ¶ 18.) Highmark was obligated to file base rates or rating formulas with the PID, and Highmark had the ability to charge specific rates within a fifteen percent band around those rate or rating formulas without filing those specific rates with the PID. (Id. ¶ 19; CCSMF (ECF No. 488) pl.'s ¶ 4.)

         Medical underwriting is a process in which insurance companies use questionnaires regarding a subscriber's past medical history in order to classify the risk of the subscriber and adjust rates charged to that subscriber for health insurance. (Id. ¶ 23.) Highmark never filed with the PID rates that employed medical underwriting for small groups because the PID informed Highmark that it would not approve any rates that employed medical underwriting for small groups. (Id. ¶ 24.) The PID-as part of its rate-regulation-limited the weight that Highmark could place on Highmark's prior claims experience with a given group, when setting renewal rates for existing small group business. (Id ¶ 25.)

         Prior to March 21, 2012:

- the PID did not have express statutory authority to regulate the rates for-profit commercial insurers charged to small-group subscribers of health insurance, and for-profit commercial insurers were not required to file small group rates with the PID (CCSMF (ECF No. 488) ¶ 26, pl. 's ¶ 5);
- the PID required for-profit health insurers to file with the PID and receive approval for the rates that they offered to individuals (id.¶ 27); - the PID required only hospital plan corporations, professional health services plan corporations, and health maintenance organizations to file with the PID their small group rates (id.¶ 27);
- for-profit health insurers used medical underwriting and prior claims experience to identify a group whose risk profile suggested that the group would be costly to insure (id ¶ 28);
- for-profit health insurers offered a higher rate to high-risk small groups to make it unlikely they would accept a for-profit insurer's proposed rates. (Declaration of William Cashion (“Cashion Decl.”) (ECF No. 459) ¶ 16);
- because the PID did not regulate for-profit insurers' rates, the for-profit insurers could offer a low price to any one group without constraining what they could charge to any other group (Cashion Decl. (ECF No. 459) ¶ 15); and
- for Highmark-when regulated by the PID-to offer the healthiest small groups comparable rates to those offered by its commercial competitors, it would have had to offer lower rates to less healthy groups as well because of the PID's rate-regulation restrictions (id ¶ 19).

         C. Highmark's Lobbying Efforts

         Highmark lobbied the Pennsylvania legislature for uniform regulation of all small group insurers. (CCSMF (ECF No. 488) ¶¶ 32, pl.'s ¶ 6; Cashion Decl. (ECF No. 459) ¶ 23.)

         On June 16, 2003, William Cashion (“Cashion”), Highmark's chief actuary, testified before the Pennsylvania Senate Banking and Insurance Committee. (CCSMF (ECF No. 488) ¶ 33.) During this testimony, he made clear that it was important that any regulation must apply uniformly to the rating and underwriting practices of all small group insurers. (Id.)

         On April 5, 2005, Candy Gallaher (“Gallagher”), Highmark's then-Director of Regulatory Affairs, testified before the Pennsylvania House Insurance Committee and requested “small group reform legislation.” (Cashion Decl., Ex. 2 (ECF No. 459-2) at 4.) During her testimony, she described what Highmark felt were the limitations that Pennsylvania's regulatory structure placed on Highmark's ability to offer competitive rates for the healthiest small groups, as well as the ability of its commercial for-profit competitors to price high-risk small groups at rates significantly higher than Highmark could charge. (Id. at 5-6.) She requested that the Pennsylvania legislature amend its regulatory framework so that the same set of rules and regulations applied to all insurers, nonprofit and for-profit alike. (Id. at 8.)

         On August 9, 2005, Kenneth Melani (“Melani”), Highmark's then-president and chief executive officer, submitted to the Pennsylvania House Insurance Committee comments for the public record. (Cashion Decl., Ex. 3 (ECF No. 459-3) at 2-7.) Melani expressed his opposition to the “two-tiered small employer insurance market, ” explaining:

House Bill 1741 does not help the vast majority of small businesses for several reasons. It will neither create more insurance choices for small companies nor expand competition. On the contrary, it will perpetuate the distorted, two-tiered small employer insurance market - one for small employers that have the good fortune of having workers in good health and one for small businesses that have the misfortune of having workers who have a random injury and/or illness.

(Cashion Decl., Ex. 3 (ECF No. 459-3) at 4.) Melani sought uniform regulation of all small group insurers. (CCSMF (ECF No. 488) ¶ 35.)

         Highmark supported the testimony of Paul Fleischacker (“Fleischacker”), an actuarial consultant, before the Pennsylvania House Insurance Committee on August 30, 2005. (Cashion Decl., Ex. 4 (ECF No. 459-4).) Fleischaker testified, among other things, that:

With the exceptions of Pennsylvania and Hawaii, all states have enacted some form of small group pricing reform.
As far as I know, all states (except Pennsylvania and Michigan) have a single uniform pricing law and guidelines applicable to all insurers (commercial insurers, Blues, HMOs, etc.) writing small group business in their states.
In summary, to achieve the goal of fair competition in market access and availability to all Pennsylvanians, it is important to control antiselection and to be able to manage the health care risk pool effectively and thus stabilize premiums to the extent possible. I believe this is only possible with a single, uniform rating law applicable to all carriers.

(Cashion Decl., Ex. 4 (ECF No. 459-4) at 4, 5, 14.)

         On September 22, 2005, Deborah Rice-Johnson (“Rice-Johnson”), Highmark's then-senior vice president for regional markets, testified before the Pennsylvania House Insurance Committee. (CCSMF (ECF No. 488) ¶ 37.) Rice-Johnson's testimony supported the passage of House Bill 1240 as a step in the right direction toward requiring all insurers to follow the same rules in setting rates for small employers. (Id.)

         On March 12, 2009, James Fawcett (“Fawcett”), Highmark's vice president for strategic and large markets, testified before the Pennsylvania House Insurance Committee. (Cashion Decl., Ex. 6 (ECF No. 459-6) at 4.) Fawcett-on behalf of Highmark-sought “passage of legislation to reform small group health insurance, ” and “to make insurance more affordable for more small employers.” (Id.) Fawcett requested legislation that stabilized insurance premiums, expanded choice of health insurance options for small companies, provided fairer market rules, i.e., “[a] common set of rules, ” and provided Pennsylvania employers “more competition and wider choices for all the risks in the smaller employer marker-not just the health risks.” (Id. at 5-6.)

         By 2009, Highmark's efforts to lobby the Pennsylvania legislature to require uniform regulation of all small group insurers in Pennsylvania were not successful. (Id. pl.'s ¶ 6.)

         D. Highmark's Plan of Withdrawal With Respect to Its Small Group Plans and Applications to the PID and Pennsylvania Department of Health to Operate as a Preferred Provider Organization

         1. The Plan of Withdrawal

         On October 13, 2009, Highmark filed a Plan of Withdrawal (the “plan of withdrawal”) and met with the PID. (Cashion Decl. (ECF No. 459) ¶ 25; Cashion Decl., Ex. 7 (ECF No. 462-1).) The job of the PID is to review an insurance provider's plan of withdrawal and determine whether it complies with Pennsylvania law. (Declaration of Darien M. Meyer (“Meyer Decl”), Ex. A (ECF No. 458-1) at 10-11.) Highmark informed the PID that it wanted to withdraw all but one of its small group plans, i.e., its Medicare complement product, and, instead, allow HHIC to offer plans to small groups as a for-profit entity. (Cashion Decl. (ECF No. 459) ¶ 26; CCSMF (ECF No. 488) ¶¶ 40, 42-43.)

         HHIC's small group PPO products were designed to use the same network as Highmark's small group PPO products. (CCSMF (ECF No. 488) ¶ 45.) The plan of withdrawal Highmark submitted to the PID and the Pennsylvania Department of Health (“DOH”) provided:

Replacement coverage will be widely available. Small employers in western Pennsylvania will have the option of a variety of PPO/Drug, PPO HDHP, EPO/Drug and Vision options available from HHIC. HMO options will continue to be available from KHPW and Medicare Complement products will continue to be available from HBCBS.

(Cashion Decl., Ex. 7 (ECF No. 462-1) at 7.)

         2. Highmark's Applications to the PID and the DOH to Operate as a Preferred Provider Organization

         Before a preferred provider organization (“PPO”) may enter the market in Pennsylvania, it first must submit an application to the PID and the DOH and then wait sixty days, after which it "may commence operations, " absent a finding of deficiencies by either agency. (Id. at pl.'s ¶ 17.) The PID's or the DOH's disapproval of a PPO application is appealable. (Id. at pl.'s ¶ 18.) The PID generated a standardized application form for companies to use when applying to operate a PPO. (CCSMF (ECF No. 488) pl.'s ¶ 14.) The application form provides that it is to be used as an "application for review and approval of a PPO under the provisions of 40 P .S. § 764a and 31 Pa. Code 152. l et seq." (Id. at pl.'s ¶ 15.)

         On October 13, 2009-the same day on which Highmark filed its plan of withdrawal with the PID-Highmark submitted to the PID and the DOH two applications: one for HHIC to operate as a “risk-assuming PPO;” and one for HHIC to operate as an “ERISA-exempt PPO” (together with the application to operate as a risk-assuming PPO, “PPO applications”). (Cashion Decl., Ex. 9 (ECF No. 484-1) at 3, 6, 13.)

         HHIC's PPO applications were submitted on the standardized application form. (Id. at pl.'s ¶ 16.) Highmark filed its PPO applications to procure the PID's and DOH's authorization for it to offer new products and for the purpose of implementing its plan to offer policies to small groups under a system where HHIC could more accurately price the plans to reflect the risk of the members. (CCSMF (ECF No. 488) ¶ 63; Cashion Decl. (ECF No. 490) ¶ 31.) The purpose of HHIC's PPO application was not to effectuate any changes in any governing laws. (Id at pl.'s ¶ 21.)

         As a general matter, in 2009 through 2010, 31 Pa. Code § 152.4 governed the scope of the review of PPO Applications by the DOH. (CCSMF (ECF No. 488) at pl.'s ¶ 28.) The DOH reviewed PPO applications to determine whether the proposed PPO satisfied eight criteria. (Id at pl.'s ¶ 29.) PPOs that were "governed and regulated under the Employee Retirement Income Security Act of 1974” (“EIRSA”) were required to “file a certificate to that effect with the Commissioner and, to the extent that…[the PPO was] regulated under ERISA, …[it was] not subject to other provisions of…[that] chapter.” (Id at pl.'s ¶ 30.) Accordingly, PPOs that were governed under ERISA were not subject to 31 Pa. Code § 152.4. (Id at pl.'s ¶ 31.)

         HHIC's PPO application to operate as an ERISA-exempt PPO included a certificate providing that HHIC was governed and regulated under ERISA (the “ERISA certificate”). (Id at pl.'s ¶ 32.) The ERISA certificate was specifically referred to in the section of the PPO application for an ERISA exempt PPO in which HHIC selected the “PPO type” for that application, i.e., ERISA Exempt. (Cashion Decl., Ex. 9 (ECF No. 484-1) at 13.) The DOH was not required to review HHIC's ERISA Exempt application because HHIC was governed and regulated under ERISA. (CCSMF (ECF No. 488) at pl.'s ¶ 33.) The DOH, however, dd review HHIC's ERISA-Exempt application. (Id at pl.'s ¶ 34.)

         The PPO applications to the PID and DOH provided:

- “HHIC will operate as a member of the Highmark Inc. family of Blue Cross and Blue Shield branded companies in the 49-county service area of Highmark Inc. d/b/a Highmark Blue Cross Blue Shield, and d/b/a Highmark Blue Shield. Business will begin migrating to HHIC on July 1, 2010, with the transfer of small group business to HHIC with July 1, 2010 renewals. New small group business will be offered products through that company beginning with July 1, 2010 effective dates” (Cashion Decl., Ex. 9 (ECF No. 484-1) at 8, 16);
- the difference in level of coverage between a network provider and non-network provider would not be greater than twenty-percent (CCSMF (ECF No. 488) 59); and
- its policies did not contain any provision or arrangements that would lead to the undertreatment or poor quality care of its subscribers (id ¶ 60).

         On December 2, 2009, the PID sent Highmark a letter providing that the PID concluded its review of Highmark's plan of withdrawal, and the PID wanted to be “informed of any issues” moving forward. (Cashion Decl., Ex. 8 (ECF No. 459-8) at 2.)

         3. The DOH's Independent Review of HHIC's Applications

         Even though Highmark submitted joint applications to the PID and the DOH, each agency conducted its own review of the applications. (CCSMF (ECF No. 488) ¶ 65.) The DOH conducted its review based upon its statutory mandate to ensure that the proposal would not result in "undertreatment or poor quality care, " and, in doing so, focused on the viability of HHIC's proposed network to make sure that HHIC would provide its subscribers with sufficient options for their healthcare. (Id ¶ 66.) The DOH reviewed the information that Highmark provided to its subscribers. (Id ¶ 67.)

         The DOH on two occasions asked for more information about the PPO applications. (CCSMF (ECF No. 488) at pl.'s ¶ 35.) First, the DOH asked for “confirmation that the application is for a PPO, ” an opportunity to “review a copy of the member materials before they are finalized, ” and “information regarding Network Access.” (Id. at pl.'s ¶ 36.) On February 12, 2010, HHIC responded to the DOH's inquiries. (Id.)

         On March 15, 2010, the DOH asked HHIC questions on three other topics, which included co-payments, whether “under the network arrangements for HHIC that beneficiaries could go to a participating facility, yet still be billed by non-par providers, ” and whether “Act 4 of 2009 appl[ied]” regarding “coverage for children.” (CCSMF (ECF No. 488) pl.'s ¶ 37.) Highmark is not aware of any other communications with the DOH about the HHIC's PPO applications. (Id. at pl.'s ¶ 38.) On February 12, 2010, and again on March 23, 2010, Highmark responded to questions from the DOH about the PPO applications. (Id. ¶ 68.)

         On April 26, 2010, the DOH provided Highmark written approval of the PPO applications. (Id. ¶ 69.) The DOH's approval:

“permit[ted] HM Health Insurance Company d/b/a Highmark Health Insurance Company (HHIC) to establish, operate and maintain a risk-assuming PPO under which it assumes traditional insurance-type financial risk regarding the provision of insured health benefits plans set forth in the application to insureds, and to provide preferred provider arrangements described therein.”

(CCSMF (ECF No. 488) ¶ 70 (quoting Cashion Decl., Ex. 35 (ECF No. 459-35) at 2.)

         4. The PID's Review of the PPO Applications

         On November 25, 2009, the PID formally disapproved the PPO applications. (CCSMF (ECF No. 488) ¶ 72.) The PID informed Highmark that it needed to submit an individual conversion policy form for PID's review and approval. (Id. ¶ 73.) An individual conversion policy is an insurance policy that covers various circumstances in which a subscriber is no longer eligible for insurance under the small group policy, e.g., a situation in which the insurer discontinues the small group policy. (Id. ¶ 75.) At the relevant time, all insurers that offered group policies, regardless whether they were commercial insurers, were required to offer individual conversion policies. (CCSMF (ECF No. 488) ¶ 75, pl.'s ¶ 47.) The PID had the authority to review and approve individual conversion policies and rates. (Id. at pl.'s ¶ 48.) HHIC was required to comply with the individual conversion policy requirements. (Id. at pl.'s ¶ 49.)[6]

         The PID's letter dated November 25, 2009, explained the deficiency in the PPO applications as follows:

The Department has completed its review of this filing and has but one request. While the Group forms have been deregulated, Group Conversion forms are still considered Individual forms, and, therefore, must be filed for Department review. Please file the required Conversion forms under a separate filing, referencing this filing as the Group that the Conversion form is to be used with.

(Cashion Decl., Ex. 26 (ECF No. 459-26) at 2-3.) The PID in its letter dated November 25, 2009, did not identify any other deficiency with respect to the PPO applications. (CCSMF (ECF No. 488) pl.'s ¶ 51.)

         On February 12, 2010, Highmark submitted to the PID its individual conversion plan rate application. (CCSMF (ECF No. 488) ¶ 76.) As part of this application, Highmark provided HHIC's proposed individual conversion plan rates, an actuarial memorandum describing each of the factors that it used to calculate HHIC's individual conversion plan rates, and information about the benefits included in HHIC's individual conversion plan policy. (Id.) On February 15, 2010, Highmark submitted an individual conversion policy form application to the PID. (Id. ¶ 90.) As part of this application, Highmark on behalf of HHIC provided copies of the policies and forms that described the coverage, network, and claims process for the individual conversion product. (Id.)

         On February 22, 2010, the PID rejected the original individual conversion policy rate-filing. (Id. ¶ 77.) The PID requested that Highmark certify that it used the same process for developing HHIC's individual conversion plan rates as it used for developing its group rates, and requested information regarding the “methodology, starting data, trends used, benefit relativity factors applied to medical and drug components, administrative expenses PMPM, retention-premium tax, risk charge, contingency charge and FIT percentages, and conversion contract distribution.” (Id. ¶ 78.)

         On March 9, 2010, Highmark submitted its revised individual conversion policy rate application. (Id. ¶ 79.) In this revised submission, Highmark explained that HHIC developed its rates based upon small group claim experience for the period of November 1, 2008, through October 31, 2009, with run-out through November 30, 2009. (Id. ¶ 80.) In setting the individual conversion policy rates, the fact that less healthy members were more likely to purchase conversion products because healthier members were unlikely to pay the full premium for an individual policy was considered. (Id. ¶ 81.) Highmark provided to the PID for approval HHIC's requested individual conversion policy rates. (Id. ¶ 82.) Highmark separated HHIC's rates for those policies that included only an individual subscriber, those that included a subscriber and a child, those that included a subscriber and children, those that included a subscriber and a spouse, those that included a subscriber, a spouse, and a child, and those that included a subscriber, a spouse, and children. (Id. ¶ 83.)

         On March 12, 2010, the PID rejected the revised individual conversion plan rate-filing because HHIC used demographic information in rating the conversion pool. (Id. ¶ 84.) The PID informed Highmark that HHIC could not rate the conversion members as if they were their own rating pool and that HHIC could not use age as a rating factor for these individuals. (Id. ¶ 85.) The PID directed that HHIC rate its individual conversion plan policies using the same restrictions that the PID applied to Highmark's small groups. (Id. ΒΆ 86.) On March 22, 2010, ...


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