In re Blue Cross Blue Shield Antitrust Litig.
In re Blue Cross Blue Shield Antitrust Litig.
2017 WL 11681953 (N.D. Ala. 2017)
September 21, 2017

Putnam, T. Michael,  United States Magistrate Judge

Proportionality
Failure to Produce
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Summary
The court granted the motion to compel for the production of documents or other information used to report or disclose to the Alabama Department of Insurance the formulas, methods, or manner in which the RRC and the RRC renewal credits were calculated for each class member merit group from 2009 to 2016, as well as reports or spreadsheets showing the calculation of the renewal premiums for the top 30 class member merit groups. This may include ESI, which BCBS-AL is directed to produce by October 20, 2017.
Additional Decisions
IN RE: BLUE CROSS BLUE SHIELD ANTITRUST LITIGATION
Master File No.: 2:13-CV-20000-RDP | (MDL No.: 2406)
United States District Court, N.D. Alabama, Southern Division
Filed September 21, 2017
Putnam, T. Michael, United States Magistrate Judge

DISCOVERY ORDER No. 69

*1 The Subscriber Plaintiffs have filed a motion to compel Blue Cross and Blue Shield of Alabama (“BCBS-AL”) to produce records related to BCBS-AL's “Respective Rate Credit” calculations from 2009 to 2016. (Doc. 1528). BCBS-AL has filed its opposition (Doc. 1536), and the motion was argued at the court's standing discovery telephone conference on September 14, 2017.
 
The Retrospective Rate Credit (“RRC”) is a “premium stabilization reserve” that is created when the premiums charged a group exceeds the claims paid for that group, less a reserve maintained by BCBS-AL. The group insurance contract between BCBS-AL and each insured group contains explicit provisions authorizing the creation of the RRC reserve and setting out a formula for applying a portion of the RRC to the group's renewal premium for the next coverage year to offset some of the cost of the renewal premium. Subscriber Plaintiffs seek information about the RRC because it is a factor used in calculating BCBS-AL's Medical Loss Ratio (“MLR”),[1] which itself is a factor in measuring the profitability of the company.[2] BCBS-AL points out that the yearly change in the RRC is less than one percent of the premiums collected and claims paid, and thus an insignificant part of the profit picture of the company.
 
As a result of negotiations with BCBS-AL, the Subscribers have limited their request to four categories of information:
 
1. The formulas used for determining each annual RRC from 2009 to 2016;
 
2. The formulas used to calculate the portion of the RRC used as a prospective rate credit for each group's renewal premium;
 
3. Annual reports for all accounts showing the manner in which the RRC was calculated each year from 2009 to 2016; and
 
4. Information showing how renewal rates were calculated for the top 25 “class member merit groups” (i.e., groups with between 50 and 200 members) with the greatest positive RRC balance for each year from 2009 to 2016, or alternatively, information to show how renewal rates were calculated for the top 30 class member merit groups with the greatest positive RRC balance in one selected year, tracking those same 30 groups for each year from 2009 to 2016.[3]
 
*2 BCBS-AL opposes the motion, contending that the production request comes too late in discovery and interferes with already heavy discovery demands being met before the deadline for completion of discovery. Further, it asserts that the production requests are indeed burdensome and disproportionate to the needs of the case given the relatively small size of the RRC compared to the overall financial picture of the company.
 
Insofar as BCBS-AL has reported to the Alabama Department of Insurance the formulas used to calculate, respectively, the RRC for each group and the credit to be applied to each group's renewal premium, production of the formulas is not burdensome—BCBS-AL should be able to identify, locate, and produce the document or record used to report the information to the Department of Insurance for the years 2009 through 2016.[4] Therefore, Subscriber Plaintiffs' motion is GRANTED as to this category of document requests, and BCBS-AL is DIRECTED to produce to the Subscribers such documents or other information BCBS-AL used to report or disclose to the Alabama Department of Insurance the formulas, methods, or manner in which the RRC and the RRC renewal credits were calculated for each class member merit group (groups of between 50 to 200 members) from 2009 to 2016.
 
The Subscribers' request for information sufficient to show how each class member merit group's RRC was calculated from 2009 to 2016 leaves the court baffled. Attached as an exhibit to the motion are pages from reports apparently produced in discovery by BCBS-AL showing, by group for several years, the cumulative RRC for each group, changes in the RRC occurring for each group during the reporting year, the amount of “minimum RRC” set by BCBS-AL for each group, and the resulting “excess RRC” for each group. As these pages clearly come from multi-page reports styled “Computation of RRC Liability for Merit Groups” and “Computation of RRC Liability for National Groups,” and as these pages have Bates numbers indicating their production through discovery, the court must assume that the Subscribers have the full reports for at least the years 2010 through 2015. (See Ex. 1 to Subscribers' motion to compel, Doc. 1528-1). To the extent this assumption is not correct (i.e., the Subscribers do not have the full reports or do not have the reports from 2009 and 2016 as well), BCBS-AL is DIRECTED to produce such full reports to the Subscribers for the years 2009 to 2016, including any documents showing RRC “true-ups” during that period.
 
Beyond these particular reports, however, the court does not understand what other information the Subscribers seek.[5] Their motion to compel states that they are willing to accept “information in an annual report and in a format and containing the data categories consistent with” the RRC exhibits attached to the motion. Then, “Plaintiffs request the data as it exists in the databases for all accounts....” (Doc. 1528). It appears to the court that the “Computation of RRC Liability for Merit Groups” and “Computation of RRC Liability for National Groups” for each year are such annual reports related to RRC, set out by year and group. Thus the question is posed, what other data are Subscribers seeking? Insofar as the Subscribers want BCBS-AL to produce all of the data entries and grandular information underlying the totals reflected in these reports, the request is simply disproportionate to the needs of this case. BCBS-AL describes the RRC as being “updated each policy year by offsetting the claims costs, overhead and other rate factors from the premiums a group has paid.” Subscribers already should have data on the “claims costs” of various groups from the structured data production that has occurred. Although it is not clear whether Subscribers already have data related to “overhead” and “other rate factors” used to calculate the RRC of each group, if that is the data requested, it would seem to require BCBS-AL to identify, gather, and produce virtually all of its financial data related to its general “overhead.”[6] Effectively, the Subscribers appear to be asking for almost every jot and tittle of BCBS-AL's financial data, or at least that BCBS-AL track back to its financial data every possible factor and data point used to calculate “overhead” in multiple years.
 
*3 For these reasons, the court is left in a quandary—either the Subscribers are still seeking every bit of BCBS-AL's financial data, or the court simply does not understand what they seek. The court pleads its own doltishness. While the court understands that the Subscribers want to inquire into where the numbers in BCBS-AL's “Computation of RRC Liability for Merit Groups” and “Computation of RRC Liability for National Groups” reports come from, the court does not understand what specific data or information (short of all of BCBS-AL's financial data) can supply that answer.
 
Notwithstanding the court's ignorance, BCBS-AL appears to understand what data is sought. In its opposition to the motion to compel, it states, “[T]he reports that Plaintiffs seek extend back seven years and the early versions of the reports may involve a combination of electronic and hard copy records.” (See Doc. 1536, ¶ 10). Plainly, BCBS-AL has in mind a distinct set of the reports not previously produced in discovery.[7] Insofar as there exists a distinct and identifiable set of reports related to the calculation of each group's RRC, the motion to compel is GRANTED, and BCBS-AL is DIRECTED to produce such reports.
 
Finally, the Subscribers also seek “information sufficient to show how renewal rates were calculated for [each year between] 2009-2016”[8] for either the 25 merit groups with the greatest positive RRC in each of those year, or, in each of those years, the 30 merit groups with the greatest positive RRC in a selected year. This request for information has many of the same problems the court identified with respect to the preceding category, but, again, it appears that BCBS-AL knows the particular reports Subscribers are seeking. As the Subscribers already have the “Computation of RRC Liability for Merit Groups” and “Computation of RRC Liability for National Groups” reports, which show both the cumulative and current-year RRC by group, they are able to identify the 30 merit groups with the greatest positive RRC for any selected year.
 
The motion to compel, therefore, is GRANTED, and the Subscriber Plaintiffs may, by October 2, 2017, identify to BCBS-AL the 30 merit groups with the greatest positive RRC in any single year of their choice (noting for BCBS-AL the year from which these merit groups were chosen). By October 20, 2017, BCBS-AL shall produce to the Subscribers such reports or spreadsheets as may exist showing the calculation of the renewal premiums for each of these 30 merit groups in each year from 2009 to 2016.
 
Unless otherwise stated herein, production required by this Order shall be made by October 20, 2017. In all other respects, the motion to compel is DENIED.
 
DONE this 21st day of September, 2017.

Footnotes
Subscriber Plaintiffs also contend that the RRC may have an anticompetitive purpose as well. They assert that, because the RRC reserve is retained by BCBS-AL whenever a group leaves to seek coverage with another carrier, it deters insured groups from shopping for insurance with competitors of BCBS-AL. Whether this is true or not, it does not justify discovery related to the calculation of the RRC. The forfeiture of the RRC reserve is an express provision in the insurance contract between BCBS-AL and its insured groups, which these plaintiffs acknowledge they already possess.
BCBS-AL has argued that the lack of health-insurance competitors in the Alabama market is not the result of its market dominance, but because its thin margin of profit makes the Alabama market unattractive to competitors. In response, the Subscribers have argued that BCBS-AL is more profitable than it wants to admit, and that it has hidden excess profits in subsidiary companies and various reserves that, for accounting purposes, appear on the books as a liability.
The Subscribers believe the latter alternative is less burdensome to BCBS-AL. Under the former, BCBS-AL would be required to rank the positive RRC balances of merit groups for each year from 2009 to 2016 in order to identify the top 25 such groups with the greatest positive RRC balance in each year. Under the latter option, the groups would be ranked in only one select year, to identify the top 30 for that particular year, and then the renewal-rate calculation related to these 30 groups would be provided for each year from 2009 to 2016, regardless of whether the groups were or were not in the top 30 in each respective year. Under the second option, BCBS-AL need only search for data related to the renewal rates of the 30 specifically identified merit groups, and would not have to search and rank every group in each year.
During the telephonic hearing on September 14, counsel for BCBS-AL reported that he believed the formulas used were consistent across classes of groups and across the years from 2009 to 2016. If this is not correct and BCBS-AL can demonstrate that there were different formulas for different classes of groups or in different years, BCBS-AL may seek reconsideration of this aspect of this Order, with an appropriate showing of the burden it believes production will entail.
Although the court confesses below to being a dolt, the court understands the difference between, on the one hand, having the final numbers that are the product of a calculation and, on the other hand, having information about what went into the calculation and how it was done. What the court does not understand is, short of asking for everything recorded as financial data by BCBS-AL, what limited or identifiable body of data would assist the Subscribers in understanding how the RRC calculation was performed every year. The court lacks information about, and an understanding of, what this data looks like, what it is called, or how to describe it.
As the court understands it, “overhead” is some calculated pro rata share of BCBS-AL's company “overhead,” its overall cost of doing business, assigned to each insured group. Thus, a group's RRC is a function of subtracting from the premiums it has paid the cost of claims paid to medical providers and a pro rata share of BCBS-AL's overall cost of doing business (i.e., wages, taxes, capital expense, debt servicing, etc.). The court is aware that the process and data used to calculate such a pro rata share of “overhead” for each group are opaque to the Subscribers, but to reach an understanding of it seems to imply the need to look at all of BCBS-AL's financial data for anything that contributes to its overall cost of doing business.
This set of reports must be different from BCBS-AL's “Computation of RRC Liability for Merit Groups” and “Computation of RRC Liability for National Groups” reports, which, as explained, seem already to have been produced through discovery.
The court notes here carefully that the Subscribers seek information about the calculation of “renewal rates.” (See Doc. 1528, pp. 3 of 13 and 8 of 13). This is different than information related to the calculation of the RRC credit given against renewal rates, or at least the court reads it this way.