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Noel Carden 1
Freedom Court Reporting, Inc 877-373-3660
1 IN THE UNITED STATES DISTRICT COURT
2 FOR THE NORTHERN DISTRICT OF ALABAMA
3 SOUTHERN DIVISION
4
5 IN RE: BLUE CROSS BLUE SHIELD
6 Master File No. 2:13-CV-20000-RDP
7 ANTITRUST LITIGATION
8 MDL NO. 2406
9
10
11 CONFIDENTIAL VIDEO DEPOSITION OF
12 BLUE CROSS BLUE SHIELD OF ALABAMA 30(b)(6)
13 (THROUGH DEPONENT NOEL CARDEN)
14 Maynard, Cooper & Gale, P.C.
15 2400 Regions Harbert Plaza
16 1901 Sixth Avenue North
17 Birmingham, Alabama 35203
18 July 29, 2016
19
20 REPORTED BY: Laura H. Nichols
21 Certified Realtime Reporter,
22 Registered Professional
23 Reporter and Notary Public
24
25
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Noel Carden 2
Freedom Court Reporting, Inc 877-373-3660
1 A P P E A R A N C E S
2
3 FOR THE SUBSCRIBER PLAINTIFFS:
4 Messrs. Cyril V. Smith
5 and Daniel P. Moylan
6 Attorneys at Law
7 Zuckerman Spaeder LLP
8 100 East Pratt Street
9 Suite 2440
10 Baltimore, Maryland 21202-1031
11 410.949.1145
14
15 FOR THE SUBSCRIBER PLAINTIFFS:
16 Mr. Chris T. Hellums
17 Attorney at Law
18 Pittman, Dutton & Hellums, P.C.
19 2001 Park Place North
20 1100 Park Place Tower
21 Birmingham, Alabama 35203
22 205.322.8880
24
25
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Noel Carden 3
Freedom Court Reporting, Inc 877-373-3660
1 A P P E A R A N C E S (Continuing)
2
3 FOR THE SUBSCRIBER PLAINTIFFS:
4 Ms. Megan E. Jones
5 Attorney at Law
6 Hausfeld
7 1700 K Street Northwest
8 Suite 650
9 Washington, DC 20006
10 202.540.7200
12
13 FOR THE SUBSCRIBER PLAINTIFFS:
14 Mr. Barry A. Ragsdale
15 Attorney at Law
16 Sirote & Permutt, P.C.
17 2311 Highland Avenue South
18 Birmingham, Alabama 35205
19 205.930.5100
21
22
23
24
25
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Noel Carden 4
Freedom Court Reporting, Inc 877-373-3660
1 A P P E A R A N C E S (Continuing)
2
3 FOR THE SUBSCRIBER PLAINTIFFS:
4 Mr. Gregory Louis Davis
5 Attorney at Law
6 Davis & Taliaferro, LLC
7 7031 Halcyon Park Dr
8 Montgomery, Alabama 36117-7763
9 334.832.9080
11
12 FOR THE SUBSCRIBER PLAINTIFFS:
13 Ms. Melissa Willett
14 Attorney at Law
15 Boies, Schiller & Flexner LLP
16 5301 Wisconsin Avenue Northwest
17 Washington, D.C. 20015
18 202.237.2727
20
21
22
23
24
25
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Noel Carden 5
Freedom Court Reporting, Inc 877-373-3660
1 A P P E A R A N C E S (Continuing)
2
3 FOR THE PROVIDER PLAINTIFFS:
4 Ms. Kitty Rogers Brown
5 Attorney at Law
6 White Arnold & Dowd, P.C.
7 The Massey Building
8 2025 Third Avenue North
9 Suite 500
10 Birmingham, Alabama 35203
11 205.323.1888
13
14 FOR THE DEFENDANT, BLUE CROSS BLUE SHIELD
15 ASSOCIATION:
16 Ms. Anne Salomon
17 Attorney at Law
18 Kirkland & Ellis
19 300 North LaSalle
20 Chicago, Illinois 60654
21 312.862.2000
23
24
25
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Noel Carden 6
Freedom Court Reporting, Inc 877-373-3660
1 A P P E A R A N C E S (Continuing)
2
3 FOR THE DEFENDANT, CAPITAL BLUECROSS:
4 Mr. Jess R. Nix
5 Attorney at Law
6 Spotswood Sansom & Sansbury
7 One Federal Place
8 1819 Fifth Avenue North
9 Suite 1050
10 Birmingham, Alabama 35203
11 205.986.3620
13
14 FOR THE DEFENDANT, BLUE CROSS BLUE SHIELD OF
15 ALABAMA:
16 Mr. Carl S. Burkhalter
17 and Ms. Sarah S. Glover
18 Attorneys at Law
19 Maynard, Cooper & Gale, P.C.
20 2400 Regions Harbert Plaza
21 1901 Sixth Avenue North
22 Birmingham, Alabama 35203
23 205.254.1000
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Noel Carden 7
Freedom Court Reporting, Inc 877-373-3660
1 A P P E A R A N C E S (Continuing)
2
3 FOR THE DEFENDANT C&M DEFENDANT PLANS
4 (VIA TELECONFERENCE):
5 Ms. Allyson M. McKinstry
6 Attorney at Law
7 Crowell Moring
8 590 Madison Avenue
9 20th Floor
10 New York, New York 1002-2544
11 212.223.4000
13
14 ALSO FOR THE CO-DEFENDANTS (VIA TELECONFERENCE):
15 Mr. Thomas M. Trucksess
16 Attorney at Law
17 Hogan Lovells
18 Park Place II
19 7930 Jones Branch Drive
20 Ninth Floor
21 McLean, Virginia 22102
22 703.610.6100
24
25
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Noel Carden 8
Freedom Court Reporting, Inc 877-373-3660
1 A P P E A R A N C E S (Continuing)
2
3 FOR THE DEFENDANT, BLUE CROSS BLUE SHIELD OF
4 MISSISSIPPI:
5 Mr. M. Patrick McDowell
6 Attorney at Law
7 Brunini, Grantham, Grower & Hewes, PLLC
8 190 East Capitol Street
9 Suite 100
10 Jackson, Mississippi 39201
11 601.960.6925
13
14 FOR THE DEFENDANT, USABLE MUTUAL INSURANCE COMPANY,
15 d/b/a ARKANSAS BLUE CROSS AND BLUE SHIELD
16 (VIA TELECONFERENCE):
17 Ms. Samantha A. Robbins
18 Attorney at Law
19 Foley & Lardner LLP
20 Washington Harbour
21 3000 K Street Northwest
22 Suite 600
23 Washington, D.C. 20007-5109
24 202.672.5300
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Noel Carden 9
Freedom Court Reporting, Inc 877-373-3660
1 A P P E A R A N C E S (Continuing)
2
3 OTHERS PRESENT:
4 Mr. Michael J. Velezis
5 Vice President, Legal Services
6 450 Riverchase Parkway East
7 Birmingham, Alabama 35244
8 205.220.5384
10
11 Mr. Daniel J. Fanaras
12 The Brattle Group
13 120 West 45th Street
14 Suite 2702
15 New York, New York 10036
16 212.289.3650
18
19 Mr. Leslie Strassberg
20 Consultant
21 2200 South Ocean Lane
22 Apartment 2004
23 Fort Lauderdale, Florida 33316
24 443.721.8331
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Noel Carden 10
Freedom Court Reporting, Inc 877-373-3660
1 A P P E A R A N C E S (Continuing)
2
3 OTHERS PRESENT, CONTINUING:
4 Mr. Scott Pierce, Videographer
5 Freedom Court Reporting
6 2031 Shady Crest Drive
7 Hoover, Alabama 35216
8 205.397.2397
10
11
12
13
14
15
16
17
18
19
20
21
22
23
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Noel Carden 11
Freedom Court Reporting, Inc 877-373-3660
1 INDEX OF EXAMINATION
2
3 Page:
4 EXAMINATION BY MR. SMITH 17
5 EXAMINATION BY MR. BURKHALTER 325
6 REEXAMINATION BY MR. SMITH 329
7
8
9
10 INDEX OF PLAINTIFFS' EXHIBITS
11
12 Page:
13 PX-BCBS-AL30(b)(6)001-Carden 28
14 (Plaintiffs' Third Amended Notice of
15 30(b)(6) Deposition of Defendant Blue Cross
16 Blue Shield Alabama)
17 PX-BCBS-AL30(b)(6)002-Carden 78
18 (Alabama Department of Insurance
19 Insurance Regulation, Chapter 482-1-116,
20 Alabama Small Employer Allocation Program)
21 PX-BCBS-AL30(b)(6)003-Carden 95
22 CONFIDENTIAL (Letter dated March 28,
23 2008, from Carden to Bell, beginning with
24 Bates Number BCBSAL_0000001975)
25
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Noel Carden 12
Freedom Court Reporting, Inc 877-373-3660
1
2 INDEX OF PLAINTIFFS' EXHIBITS, CONTINUING
3
4
5 Page:
6 PX-BCBS-AL30(b)(6)004-Carden 133
7 (Final, Report on the Medical Loss
8 Ratio Examination of Blue Cross and Blue
9 Shield of Alabama for the 2013 MLR
10 Reporting Year)
11 PX-BCBS-AL30(b)(6)005-Carden 158
12 CONFIDENTIAL (Editing Error Report
13 for ID B14480, beginning with Bates Number
14 BCBSAL_0000049405)
15 PX-BCBS-AL30(b)(6)006-Carden 158
16 CONFIDENTIAL (Earned Income for June
17 2012 by LOB, beginning with Bates Number
18 BCBSAL_0000049461)
19 PX-BCBS-AL30(b)(6)007-Carden 242
20 CONFIDENTIAL (Collective documents,
21 beginning with Bates Number
22 BCBSAL_0000180968)
23
24
25
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Noel Carden 13
Freedom Court Reporting, Inc 877-373-3660
1 INDEX OF PLAINTIFFS' EXHIBITS, CONTINUING
2
3 Page:
4 PX-BCBS-AL30(b)(6)008-Carden 266
5 CONFIDENTIAL (Blue Cross and Blue
6 Shield of Alabama, Part III Actuarial
7 Memorandum and Certification, Individual
8 Market Rates Effective: January 1, 2014,
9 beginning with Bates Number with Bates
10 Number BCBSAL_0000047418)
11 PX-BCBS-AL30(b)(6)009-Carden 305
12 (Email chain, beginning with Bates
13 Number ALDO1_000000151)
14 PX-BCBS-AL30(b)(6)010-Carden 305
15 (Email chain, beginning with Bates
16 Number ALDO1_000000185)
17 PX-BCBS-AL30(b)(6)011-Carden 311
18 (Alabama Department of Insurance,
19 Insurance Regulation, Chapter 482-1-024,
20 Filing for Approval of All Life and
21 Accident and Health Policy Forms, Riders,
22 Endorsements and Applications)
23
24
25
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Noel Carden 14
Freedom Court Reporting, Inc 877-373-3660
1 S T I P U L A T I O N
2 IT IS STIPULATED AND AGREED, by and
3 between the parties, through their respective
4 counsel, that the deposition of BLUE CROSS BLUE
5 SHIELD OF ALABAMA 30(b)(6), (THROUGH DEPONENT NOEL
6 CARDEN), may be taken before Laura H. Nichols,
7 Commissioner, Certified Realtime Reporter,
8 Registered Professional Reporter and Notary Public;
9 That it shall not be necessary for
10 any objections to be made by counsel to any
11 questions, except as to form or leading questions,
12 and that counsel for the parties may make
13 objections and assign grounds at the time of trial,
14 or at the time said deposition is offered in
15 evidence, or prior thereto;
16 That any objection as to the form of
17 a question shall be deemed to have been made on
18 behalf of all other parties and on all applicable
19 grounds.
20
21
22
23
24
25
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Noel Carden 15
Freedom Court Reporting, Inc 877-373-3660
1 I, Laura H. Nichols, a Certified
2 Realtime Reporter and Registered Professional
3 Reporter of Birmingham, Alabama, and a Notary
4 Public for the State of Alabama at Large, acting as
5 Commissioner, certify that on this date, as
6 provided by the Federal Rules of Civil Procedure of
7 the United States District Court, and the foregoing
8 stipulation of counsel, there came before me at the
9 law offices of Maynard, Cooper & Gale, P.C., 2400
10 Regions Harbert Plaza, 1901 Sixth Avenue North,
11 Birmingham, Alabama 35203, on July 29, 2016,
12 commencing at 9:05 a.m., BLUE CROSS BLUE SHIELD OF
13 ALABAMA 30(b)(6), (THROUGH DEPONENT NOEL CARDEN),
14 witness in the above cause, for oral examination,
15 whereupon the following proceedings were had:
16
17 * * *
18 THE VIDEOGRAPHER: This begins Disk
19 Number 1 in the deposition of Noel Carden in the
20 matter of Blue Cross-Blue Shield antitrust
21 litigation, Case Number 2:13-CV-20000-RDP.
22 We are on the record at 9:05 a.m. on
23 Friday, July 29th, 2016. This deposition is taking
24 place in Birmingham, Alabama. My name is Scott
25 Pierce representing Freedom Court Reporting.
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Noel Carden 16
Freedom Court Reporting, Inc 877-373-3660
1 Would the court reporter please swear
2 in the witness?
3
4 BLUE CROSS BLUE SHIELD OF ALABAMA 30(b)(6)
5 (THROUGH DEPONENT NOEL CARDEN),
6 having been first duly sworn, was examined and
7 testified as follows:
8
9 MR. BURKHALTER: Sorry. Before we
10 start, Cy, just to clarify, the usual stipulation
11 is in effect?
12 MR. SMITH: This is about what
13 objections are for everybody?
14 MR. BURKHALTER: Correct. It is
15 redundant because the protocol says it, but just to
16 be clear, all objections are preserved other than
17 as to the form of the question.
18 MR. SMITH: Right.
19 MR. BURKHALTER: Okay. We would like
20 to reserve the right to read and sign the
21 deposition, and we want to designate it as
22 confidential, please.
23 MR. SMITH: Okay. That all makes
24 sense. You all set?
25
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Noel Carden 17
Freedom Court Reporting, Inc 877-373-3660
1 EXAMINATION BY MR. SMITH:
2 Q. Good morning, Mr. Carden. We met
3 just a moment ago, but I think you understand my
4 name is Cy Smith. I represent the subscriber
5 plaintiffs in this case. And we are going to take
6 your sworn testimony today videotaped as well as
7 recorded by our court reporter.
8 Have you testified at a deposition
9 before?
10 A. No, I have not.
11 Q. Okay. Well, I am going to try and
12 put the questions to you one at a time. I hope
13 that they make sense to you. And if they don't,
14 you should tell me so. But if I put a question to
15 you and I don't hear any question back from you or
16 like that, then I am going to assume that you heard
17 the question, that you understood the question and
18 you are doing the best that you can personally to
19 give me a truthful, accurate and a complete answer.
20 Is that satisfactory?
21 A. Yes, it is.
22 Q. Okay. Now, other than depositions,
23 have you testified under oath before, whether at a
24 trial or a regulatory or legislative proceeding?
25 A. Not that I can recall.
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Noel Carden 18
Freedom Court Reporting, Inc 877-373-3660
1 Q. Would you just tell us how old you
2 are and what your current position is?
3 A. Yeah. I am forty-nine years old, and
4 I am the vice president and chief actuary at Blue
5 Cross and Blue Shield of Alabama.
6 Q. And do you have any other titles or
7 positions at Blue Cross -- and by the way, I am
8 just going to call it Blue Cross-Alabama if that is
9 okay.
10 A. Okay.
11 Q. Do you have any other positions or
12 titles at Blue Cross-Alabama?
13 A. I am the appointed actuary for the
14 company. I am the appointed actuary for one of our
15 subsidiaries, UTIC, and I can't think of anything
16 else at the moment.
17 Q. My understanding is that you are in
18 charge directly or indirectly of the underwriting
19 department at Blue Cross-Alabama; is that right?
20 A. I am in charge of the underwriting in
21 the actuarial department at Blue Cross.
22 Q. Do you have any separate title for
23 being in charge of underwriting?
24 A. (Shaking head.) Not that I can think
25 of, no.
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Noel Carden 19
Freedom Court Reporting, Inc 877-373-3660
1 Q. Okay. That is fine. And do you
2 remember a little ways back that you signed a
3 declaration in this case, a multipage document with
4 paragraphs and all that stuff?
5 A. Yeah, I do remember signing that.
6 Q. Who drafted that declaration?
7 A. Our legal team.
8 Q. Did you revise it after it was
9 drafted?
10 A. I had input on, yeah, what it said.
11 Q. Okay. But did you actually look at a
12 draft and make changes to it, whether it was in
13 writing or --
14 A. I am pretty sure -- I'm pretty sure I
15 did.
16 Q. Okay. Do you remember what you
17 changed in there?
18 A. Not specifically, but we did -- we
19 did go through a series of changes, but I don't
20 remember specifically, you know, prior drafts, if
21 you will.
22 Q. Uh-huh. Okay. And in order to make
23 sure -- let me step back. When you were done with
24 that declaration, did you believe that it was
25 truthful and accurate?
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Noel Carden 20
Freedom Court Reporting, Inc 877-373-3660
1 A. Yes, I did.
2 Q. That it was not misleading in any
3 way; is that right?
4 A. I would say that is correct, yeah.
5 Q. In order to satisfy yourself that it
6 was truthful and accurate and not misleading, did
7 you consult any documents? And I don't mean just
8 paper, obviously. It could be something online,
9 could be an electronic document. Did you consult
10 any documents?
11 A. Could you explain kind of what you
12 mean in terms of consulting documents?
13 Q. Well, in order to review the
14 declaration, make sure it was right, suggest any
15 changes, and before you signed it, did you consult
16 any documents?
17 A. Very possibly I did. I would assume
18 I probably did, but I don't recall specifically
19 which documents. But --
20 Q. You can't recall any particular
21 document you might have consulted?
22 A. Not at this time, no.
23 Q. All right. Did you, in order to
24 complete the declaration, make sure it was
25 accurate? Did you talk to anybody, whether in
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Noel Carden 21
Freedom Court Reporting, Inc 877-373-3660
1 person or by phone, you know, video chat, anything
2 like that?
3 MR. BURKHALTER: Other than
4 attorneys?
5 MR. SMITH: Well, okay, that is fine.
6 We can start with that.
7 Q. (BY MR. SMITH:) Other than
8 attorneys?
9 A. I probably did but I can't -- I can't
10 recall specifically, but -- so possibly.
11 Q. You can't recall any particular
12 names?
13 A. I might have talked to somebody on
14 the actuarial staff.
15 Q. Anyone in particular?
16 A. Probably Jill Cullen.
17 Q. Is she your number two?
18 A. She is the manager of the actuarial
19 services department.
20 Q. Is she the number two person in the
21 actuarial department?
22 MR. BURKHALTER: Object to the form.
23 You can answer.
24 A. What is -- would you explain what you
25 mean by number two?
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Noel Carden 22
Freedom Court Reporting, Inc 877-373-3660
1 Q. (BY MR. SMITH:) Well, you are the
2 chief actuary, right?
3 A. Correct.
4 Q. Okay. So you are in charge of the
5 actuarial department?
6 A. Yes.
7 Q. Who is your number two?
8 MR. BURKHALTER: Same objection. You
9 can answer.
10 Q. (BY MR. SMITH:) Do you know who the
11 second person in charge behind you is?
12 A. Jill Cullen is.
13 Q. I see. So you think you might have
14 talked to Jill Cullen about your declaration?
15 A. Yes.
16 Q. Do you recall talking to anybody else
17 besides Ms. Cullen?
18 A. At this time, I can't remember
19 specifically.
20 Q. Okay.
21 A. But I can't say that I didn't either
22 so --
23 Q. Uh-huh. And what did you ask
24 Ms. Cullen with regard to your declaration?
25 A. I don't recall specific questions.
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Noel Carden 23
Freedom Court Reporting, Inc 877-373-3660
1 Q. Do you recall general topics?
2 A. I can -- I can probably -- general
3 topics, probably talked about rate filings.
4 Q. Okay. Can you be a little more
5 granular than that? Because that is kind of a big
6 topic.
7 A. Right. Small group and individual
8 rate filings.
9 Q. Right.
10 A. Contents of Regulation 116.
11 Q. Okay. And why did you look at or why
12 did you ask her about 116? By the way, can we just
13 refer to that regulation -- as one of the
14 Department of Insurance regulations in the state of
15 Alabama, we are going to call that 116 or
16 Regulation 116. Is that okay?
17 A. That is fine, yeah.
18 Q. Okay. So why do you think you
19 probably talked to Ms. Cullen about Regulation 116?
20 A. Probably for a second opinion about
21 making sure that what was in the declaration was
22 accurate.
23 Q. Do you think you might have shared a
24 draft of it with Ms. Cullen, the declaration
25 itself?
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Noel Carden 24
Freedom Court Reporting, Inc 877-373-3660
1 A. I don't recall specifically.
2 Q. Other than counsel, do you recall
3 sharing a draft with anyone else besides
4 Ms. Cullen?
5 A. I do not.
6 Q. Okay. Do you have any experience or
7 knowledge about rate filing regimes for health
8 insurance outside the state of Alabama?
9 A. When you say rate filing regimes
10 outside the state, maybe explain a little bit in
11 more detail.
12 Q. Sure. So in Alabama there's a system
13 for filing rates related to health insurance,
14 right? And that is something that you are
15 knowledgeable about; is that fair?
16 A. So when you -- you know, system is
17 pretty broad, so --
18 Q. Regulatory structures, does that make
19 sense? A set of statutes, regulations, regulatory
20 oversight.
21 A. Okay.
22 Q. There is such a system in Alabama,
23 true?
24 A. There are regulations and statutes
25 about individual -- about health insurance
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Noel Carden 25
Freedom Court Reporting, Inc 877-373-3660
1 products, yes.
2 Q. Okay. And there's a requirement for
3 some kind of rate filing for individual and small
4 group health insurance products in Alabama, true?
5 This is not a trick question.
6 A. Yeah. I would agree.
7 Q. Okay.
8 A. I think that is true.
9 Q. All right. We will get into this
10 more, but you are pretty knowledgeable about that;
11 is that fair?
12 A. Yes, I think that is fair.
13 Q. Okay. Do you have any knowledge
14 about the rate filing regimes in the way I have
15 just defined it in any other state besides Alabama?
16 A. I would say that I have some
17 knowledge about other states.
18 Q. Which ones in particular?
19 A. Well, like New York comes to mind.
20 Q. Okay.
21 A. Just because I have read about it, it
22 was on syllabi and exams.
23 Q. Okay. Other states?
24 A. I could have heard information about
25 other states over the course of my career.
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Noel Carden 26
Freedom Court Reporting, Inc 877-373-3660
1 Q. All right. Can you identify any of
2 those or no?
3 A. Specific regulation, I don't think I
4 could identify. But so when you say -- maybe could
5 I get you to rephrase the question or ask it --
6 Q. Let's ask about New York for a
7 second. Does New York have what is called a file
8 and use or a Deemer Statute regarding insurance
9 rates?
10 MR. BURKHALTER: Object to the form.
11 You can answer.
12 A. I do not know.
13 Q. (BY MR. SMITH:) But you are familiar
14 with those terms, "file and use" or "Deemer"?
15 Those terms are familiar to you?
16 A. File and use I am familiar with.
17 Deemer, I think I probably know, but I am not as
18 familiar with that.
19 Q. Okay. You don't know whether or not
20 New York has that file and use system or something
21 different from that?
22 A. I don't.
23 Q. I understand that you are a member of
24 something called the chief actuaries forum at Blue
25 Cross-Blue Shield; is that fair? I should say Blue
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Noel Carden 27
Freedom Court Reporting, Inc 877-373-3660
1 Cross-Blue Shield Association. Is that fair?
2 A. Yes, that is -- that is fair.
3 Q. Okay. And how long have you been a
4 member of that?
5 A. I would assume since I have been the
6 chief actuary at Blue Cross and Blue Shield of
7 Alabama.
8 Q. Which is how long?
9 A. Fall of 2008.
10 Q. That is -- that is very handy because
11 that is sort of the beginning of the class period
12 in the case. So in this chief actuaries forum, I
13 understand that there are conference calls, at
14 least recently there have been conference calls
15 once every month among the chief actuaries; is that
16 right?
17 A. There are calls, and the chiefs are
18 invited. And in addition to other -- in addition
19 to other actuaries.
20 Q. Okay. And how often do you attend?
21 MR. BURKHALTER: Object to the form.
22 You can answer.
23 A. More than --
24 MR. BURKHALTER: Sorry.
25 A. More than half the time, I would say.
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Noel Carden 28
Freedom Court Reporting, Inc 877-373-3660
1 Q. (BY MR. SMITH:) And I have seen
2 various agendas that sometimes talk about an item
3 called a rate review white paper for those chief
4 actuaries forum. Are you familiar with a rate
5 review white paper?
6 A. Not specifically.
7 Q. Does that -- is that term familiar at
8 all to you?
9 A. I can't say that I haven't heard it
10 before, but I don't recall one specifically that I
11 have read or reviewed.
12 Q. Now, you understand that today we are
13 taking your deposition in your capacity as a
14 representative of Blue Cross-Alabama?
15 A. Yes, I do.
16 Q. You do understand that?
17 A. Yes, I do understand that.
18 Q. And did you review at some point a
19 document called a deposition notice that listed a
20 bunch of topics that you were going to testify
21 about?
22 A. Possibly.
23 Q. Well, that is fine. Why don't I hand
24 you this. We will mark it as our first exhibit.
25 (PX-BCBS-AL30(b)(6)001-Carden was
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Noel Carden 29
Freedom Court Reporting, Inc 877-373-3660
1 marked for identification.)
2 MR. SMITH: I think people probably
3 have it. We have got a couple of other copies. Do
4 you want one, Carl?
5 MR. BURKHALTER: Yeah, I do.
6 MR. SMITH: You do?
7 MR. BURKHALTER: Yeah. It is so well
8 drafted.
9 Q. (BY MR. SMITH:) Mr. Carden, does
10 that look like the document you examined before?
11 It lists out a bunch of topics if we go onto
12 Page 5 -- actually Page 6 and 7.
13 A. Okay. So I am on Page 6.
14 Q. Sure. This is the document you saw
15 before, right?
16 A. Yes, it is. I have seen it before.
17 Q. Good. Okay. So tell us, if you
18 would, what did you do to prepare yourself to
19 testify as a corporate representative in this case?
20 A. That is a pretty broad question.
21 Q. Well, why don't we start with how
22 much time have you spent preparing to testify as a
23 corporate representative?
24 A. I haven't added up all the time that
25 I prepared, and I haven't even estimated the time,
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Noel Carden 30
Freedom Court Reporting, Inc 877-373-3660
1 but I think I could say a significant amount of
2 time.
3 Q. Yeah. Can you be a little more
4 particular than that?
5 A. What are you -- can I ask what you
6 are looking for?
7 Q. A number of hours would be a good
8 place to start.
9 A. Yeah, I haven't estimated that.
10 Q. I am asking you to estimate it right
11 now.
12 A. Okay. How far does it go back?
13 Q. How about to the time that -- since
14 you submitted your declaration?
15 A. Probably at least two hundred hours
16 maybe.
17 Q. Really? Okay. So break that down
18 for me into the types of things you did to get
19 ready, whether it was talking to people, reviewing
20 documents, drafting things. What were the major
21 things you did?
22 A. That is a pretty tough question. I
23 don't have it broken down, so I didn't bring that
24 kind of information necessarily with me. I would
25 say broadly kind of what I have done is maybe
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1 reviewed -- reviewed documents like this, reviewed
2 the documents that were submitted with my
3 declaration, talked to internal counsel, maybe read
4 some prior rate filings.
5 Q. About how many prior rate filings
6 would you say you reviewed to get ready for this
7 deposition?
8 A. Ten to fifteen maybe.
9 Q. Okay. What else did you do?
10 A. Spent some time thinking about it.
11 Q. Okay. How about talking to people
12 who aren't attorneys? Tell me what you did in that
13 regard.
14 A. I don't remember specifically.
15 Q. Well, did you talk to --
16 A. I can't say that I haven't had a
17 conversation with people about it.
18 Q. Right. Did you talk to Jill Cullen?
19 A. I would think that I probably did.
20 Q. Who else at Blue Cross-Alabama did
21 you talk to to get ready?
22 A. It would be hard for me to list
23 everyone that I have talked to.
24 Q. Oh, there are a lot? A dozen?
25 A. Possibly a dozen.
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1 Q. Okay. What else did you do? You
2 said you looked at your declaration, talked to
3 internal counsel, read ten to fifteen rate filings
4 and talked to potentially a dozen people at Blue
5 Cross-Alabama. Anything else?
6 A. Not that I can think of at the
7 moment.
8 Q. Other than rate filings, what kind of
9 documents did you review to get ready here?
10 A. I might have reviewed workpapers.
11 Q. Workpapers?
12 A. I might have reviewed --
13 Q. Go ahead.
14 A. -- Reg 116.
15 Q. Okay.
16 A. Maybe guidance that the State has.
17 Q. The Department of Insurance guidance?
18 A. Yes.
19 Q. So those would be bulletins, things
20 like that?
21 A. Bulletins.
22 Q. Okay.
23 A. I guess that is about all I can think
24 of specifically at the moment.
25 Q. When you say workpapers, give me a
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1 sense of what that means.
2 A. Maybe documentation that supports a
3 rate filing.
4 Q. And can you break that down further
5 for me? What kinds of workpapers or underlying
6 documents for rate filings did you review?
7 A. Could be an Excel file. It might
8 be -- it might be notes related to maybe benefit
9 design, rate calculations.
10 Q. Okay. Where are those workpapers
11 that underlie rate filing submissions maintained or
12 kept at Blue Cross-Alabama?
13 A. They would be kept in our building,
14 either electronically or in hard copy.
15 Q. Okay. But let's suppose we are
16 talking about electronically. Are they in
17 the S Drive? Are they in someplace else? Where?
18 A. There's a common server drive which
19 we call the S Drive.
20 Q. Right.
21 A. And then we have hard copy files in
22 the actuarial department.
23 Q. And are they organized by year of
24 rate filing, the hard copy files?
25 A. Generally, yes.
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1 Q. And do they go back to 2008?
2 A. Yes, they do.
3 Q. And as you sit here today, do you
4 recall actually examining hard copy files of
5 workpapers related to rate filings in preparation
6 for today?
7 A. I can't say that I didn't, but I
8 don't recall specifically -- yeah.
9 Q. And when you say that those
10 workpapers may also be maintained on the common
11 server, what is the file name? You know, if you
12 were to either look for it yourself or ask someone
13 to look for it, where would you tell them to look
14 on the S Drive?
15 A. There's a folder path structure.
16 Q. Okay.
17 A. And you would have to go to a folder,
18 and then there would be more than one file there.
19 Q. Right. And what is the folder called
20 that has these workpapers?
21 A. I couldn't quote it specifically.
22 Q. Do you have a rough sense of what it
23 might be, like rate submission workpapers? Even if
24 that is not exactly it, what is the -- what is the
25 best idea?
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1 A. Yes. Generally we put small group
2 filings in the small group folder. Individual
3 filings would be in the individual folder. Or it
4 might be in a product name.
5 Q. So it might be sorted by the generic
6 idea of individual or small group, and it might be
7 sort of by product name to find those workpapers?
8 A. Yes.
9 Q. Do those workpapers include drafts of
10 rate submissions?
11 A. Probably do.
12 Q. All right.
13 A. Yeah.
14 Q. Do those workpapers include a
15 calculation of any administrative expenses that
16 might comprise part of your rate filing?
17 A. Do you want to go into a little more
18 detail on what you mean by that?
19 Q. Well, part of your buildup for a rate
20 submission is the non -- is the retention, that is
21 to say the money that is not paid out for
22 healthcare, correct?
23 A. Yes. Yes.
24 Q. And one element of that is
25 administrative expense, right?
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1 A. Yes, it is.
2 Q. And my question is whether your
3 workpapers would generally include any kind of
4 calculation of the administrative expense factor
5 that goes into your rate submission.
6 A. There are some filings that will have
7 a buildup of administrative expense.
8 Q. And some workpapers that would show
9 how that was done?
10 A. There might be in a few filings,
11 yeah.
12 Q. Okay.
13 A. There might be.
14 Q. Okay. What about the other elements
15 of retention, do you recall whether the workpapers
16 that underlie your rate filings also include a
17 calculation of the surplus or risk margin that
18 comprise part of your retention?
19 MR. BURKHALTER: Object to the form.
20 You can answer.
21 A. Yeah. There's a -- there's a -- I
22 would say there's a component of the retention
23 factor that is for kind of risk or contribution to
24 surplus.
25 Q. (BY MR. SMITH:) Okay. And my
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1 question is whether the workpapers that you
2 maintain at Blue Cross-Alabama include any
3 background or calculation or buildup of the risk
4 margin or surplus that goes into the submission.
5 A. In which workpapers?
6 Q. The workpapers underlying your rate
7 submissions from 2008 until now.
8 A. Yeah. I don't think you are going to
9 find anything on that component of the retention
10 factor.
11 Q. In the workpapers?
12 A. Yes.
13 Q. Where at -- where would I find it, if
14 I were looking for it at Blue Cross of Alabama, the
15 calculation or buildup of risk margin or surplus
16 that goes into your rate filings? Where is that
17 maintained?
18 A. In our rate filings, there's a factor
19 that we use, and we have kept that factor constant
20 for many years.
21 Q. When you say "that factor," what are
22 you referring to?
23 A. We call it a retention factor or an
24 administrative expense factor that is the component
25 of premium that is not attributed to claims.
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1 Q. I see. And it is your testimony that
2 for many years you have maintained a constant
3 percentage of your rate submission that is for
4 retention; is that right?
5 A. It was constant for many years. We
6 did alter it in 2000 -- I think in '13, so not for
7 every filing but for most of the filings in the '08
8 to '13 time period that you are talking about.
9 Q. And '13 changed because of the
10 Affordable Care Act; is that right?
11 A. Yes.
12 Q. And that is because it introduced new
13 factors into retention?
14 MR. BURKHALTER: Object to the form.
15 You can answer.
16 Q. (BY MR. SMITH:) Again, not a trick
17 question.
18 A. Yeah. The Affordable Care Act had
19 additional taxes that we had to pay, and we built
20 those into the retention.
21 Q. Right. But from 2008 until '13, just
22 so I have this in my mind, the percentage of the
23 rates that you submitted that went to retention was
24 constant, at least to your recollection?
25 A. Let me say it is constant within
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1 each -- within -- I think it's type coverage. I am
2 going to call it that. So the factor in composite
3 might be a little different from year to year, but
4 the components were the same.
5 Q. Well, let me make sure I have got
6 that. When you say "each type of coverage," you
7 are talking about individual versus small group?
8 A. I am not talking about individual
9 versus small group.
10 Q. What do you mean by "each type of
11 coverage"?
12 A. We refer to it as basic coverage or
13 major medical coverage.
14 Q. Okay. And then the next thing I
15 heard you say was that the elements of the
16 retention stayed constant from 2008 until 2013. My
17 question was a little bit different. Was the
18 percentage of the rate that was attributed to
19 retention constant from 2008 until 2013?
20 A. The first part of your question was
21 about elements.
22 Q. Okay.
23 A. And I don't know if I know exactly
24 what you meant by that. But -- so I may get you
25 to -- I'm not sure what you said.
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1 Q. Well, sir, I think we all understand
2 that the elements of retention haven't changed a
3 lot except maybe the Affordable Care Act added some
4 new taxes, right? But the elements of
5 administrative expense, risk margin --
6 A. Okay.
7 Q. -- surplus --
8 A. Okay.
9 Q. -- taxes --
10 A. Okay.
11 Q. -- those have not changed since 2008
12 other than new taxes from the ACA, right?
13 A. Right. That's correct.
14 Q. I got that part.
15 A. Yeah.
16 Q. The earlier questions I asked were
17 designed to try and figure out how you all
18 calculated the actual numbers, not the components,
19 the names of it, but the numbers, either the
20 absolute numbers or the percentages that go into
21 your submitted rates, trying to figure out how
22 those were calculated and whether there's something
23 about that in your workpapers. Are you with me
24 now?
25 A. I think I am.
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1 Q. Okay. All right. And so my question
2 again is whether your workpapers from 2008 until
3 now at Blue Cross-Alabama show a buildup or a
4 calculation of the factors that go into retention,
5 the amount of administrative expense, the amount of
6 surplus, etcetera.
7 A. Yeah. I don't think you are going to
8 find things in our workpapers related to the
9 buildup of those factors.
10 Q. Is there some other place at Blue
11 Cross of Alabama that we would find those?
12 A. You could find them in earlier
13 documentation.
14 Q. What does that mean, earlier
15 documentation?
16 A. A document prior to 2008.
17 Q. I understand. But what document are
18 you talking about?
19 A. There's a -- there's a document that
20 has the factors broken -- and the factors broken
21 out into various components.
22 Q. And what is the name of that
23 document?
24 A. We don't have a particular name for
25 the document.
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1 Q. Are we talking about there's a single
2 document at Blue Cross of Alabama that spells out
3 the elements of retention and what either
4 percentage or absolute number should be attributed
5 to them?
6 A. Let me say we have a document -- we
7 have a document, and we may have more than one
8 document that has that broken out. But we do not
9 have a specific name for that document.
10 Q. Well, if I wanted to find it, how
11 would I go about doing that?
12 A. We would look in our hard copy files
13 or on our S Drive.
14 Q. Well, I understand those are the two
15 possibilities. But where is it maintained? When
16 was the last time you consulted it, for example?
17 A. I don't remember specifically. I
18 would say within the last year.
19 Q. Okay. So you know where to find it;
20 is that fair?
21 A. I think I could find it.
22 Q. Okay.
23 A. I may not be able to go directly to
24 it, but I could find it.
25 Q. Okay. And I am going to ask, and
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1 your attorney -- we can talk about it afterwards.
2 I would ask if that has not already been produced
3 to us in discovery, we would like to see a copy of
4 it.
5 MR. BURKHALTER: Questions like that,
6 the witness is not here to answer those questions.
7 I am happy to discuss any document questions with
8 you or with anyone during a break in the action. I
9 will go ahead and tell you, however, that the
10 document the witness is referring to has been
11 produced.
12 MR. SMITH: Okay. I am not sure I
13 have seen it.
14 Q. (BY MR. SMITH:) Let's just talk
15 about this document for a second. How many pages
16 long is it in hard copy?
17 A. The document that has the factors on
18 it I think is probably one page.
19 Q. Okay. And when was it prepared?
20 A. Early -- one is from the early '80s.
21 Q. You say one. Is there another, more
22 than one?
23 A. There is more than one.
24 Q. How many?
25 A. I can think of two.
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1 Q. Tell me about the other one. How
2 long is that? When was that prepared?
3 A. I think it was from the early '70s.
4 Q. And is it also one page?
5 A. I think the document is probably more
6 than one page or the factors on more than one page.
7 I think the factors are probably on one page.
8 Q. The factors comprising retention?
9 A. Yes.
10 Q. And since it is so short --
11 A. But they could go to two pages. I'm
12 not positive.
13 Q. Okay. We are not going to live or
14 die about one or two pages. We have got bigger
15 fish to fry. So what does it say about retention
16 on that one or two pages?
17 A. I don't recall what it says
18 necessarily. It has -- it has the factors broken
19 out into various components.
20 Q. Okay. By name, right?
21 MR. BURKHALTER: Object to the form.
22 You can answer.
23 Q. (BY MR. SMITH:) Does it break down
24 the factors by name?
25 A. Okay. By name, do you want to go a
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1 little bit deeper, a little more --
2 Q. Well, administrative expense, risk
3 margin, surplus, profit, things like that.
4 A. Yes, there will be names to the
5 components.
6 Q. And are those ones that I just -- I'm
7 sorry. Go ahead.
8 A. They are probably on there. They may
9 not be the only thing that is on there.
10 Q. Okay. And does it assign -- other
11 than having a name for those elements of retention,
12 does it also state an amount of your retention that
13 will be attributed to each of those elements?
14 A. It would -- for example, if the
15 factor were ten, it might break that ten up into
16 administrative expense -- it would break the ten up
17 into components where they would add up to ten.
18 Q. Okay. All right. And when we say
19 ten, that is just a made-up number. But is there
20 an actual number that is on there, either as a
21 percentage or an absolute amount that comprises
22 retention?
23 A. There is a number on there.
24 Q. And how is it framed in percentage or
25 actual amount or some other way?
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1 A. It is in decimal format.
2 Q. Meaning percentage?
3 A. Meaning a percentage.
4 Q. I see.
5 A. Yeah.
6 Q. And have you or people working under
7 you used that document or those two documents to
8 state the amount of retention in each of your
9 filings since 2008, other than when the ACA changed
10 things?
11 A. We have relied on that document as
12 support for the factor that we use in our filing.
13 Q. Okay. I understand you relied on it.
14 But did you simply take those numbers and place
15 them into your rate filings?
16 A. Those numbers were used in our rate
17 development in our filings.
18 Q. Okay. And if I were to look at the
19 retention factor that is in your various rate
20 filings, would it correspond to the factor that is
21 spelled out in those one or two documents?
22 A. I hope it would be close.
23 Q. Okay.
24 A. It should.
25 Q. And is that on file? This document
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1 or documents, is it on file with the DOI?
2 A. I think it has been sent to the DOI.
3 Q. How is it that you know that?
4 A. Because the document has indications
5 that it was sent.
6 Q. What are those indications? I am not
7 following you.
8 A. It is a letter to the department.
9 Q. Okay. I see. So these documents you
10 talked about are letters?
11 A. They are letters -- letters are part
12 of the documents in total.
13 Q. And they are letters addressed to the
14 Department of Insurance?
15 A. Somebody at the department, I think.
16 Q. That were sent to them back in the
17 early '70s or the early '80s?
18 A. Yes.
19 Q. Okay. Where were you born and where
20 did you grow up?
21 A. I was born in Mobile, Alabama, and I
22 grew up in Lineville, Alabama.
23 Q. Okay. And where did you go to
24 college?
25 A. I went to college at the University
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1 of Alabama.
2 Q. And I am guessing you probably
3 graduated with a degree; is that right?
4 A. I did.
5 Q. What was it?
6 A. A math degree. I got an applied math
7 degree.
8 Q. And when did you get that degree?
9 A. December of '89.
10 Q. Do you have any additional degrees,
11 postgraduate degrees?
12 A. Not from a college.
13 Q. Do you have any certifications that
14 aren't from college?
15 A. I have actuarial credentials.
16 Q. Okay. And I have seen the initials
17 FSA and MAAA. Those are your actuarial
18 certifications?
19 A. The FSA is, I would say, the
20 actuarial credential, kind of education credential,
21 if you will.
22 Q. Right.
23 A. The MAA is that I am a member of the
24 American Academy of Actuaries.
25 Q. For the MAAA, did you have to pass
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1 any tests or do any examination procedure?
2 A. You had to have the -- the FSA allows
3 you to get the MAAA.
4 Q. Okay.
5 A. Not only -- that is not the only
6 thing that allows that.
7 Q. Okay.
8 A. And there are other -- that is not
9 the only way you can get it, so I don't want you to
10 think that.
11 Q. Again, we have got bigger fish to
12 fry. So what did you do after you graduated from
13 the University of Alabama?
14 A. Went on a job hunt. I moved back to
15 Lineville for about nine months, got a job at Blue
16 Cross. And I have been at Blue Cross since the
17 fall of '90.
18 Q. And the whole time in the actuarial
19 department, I assume?
20 A. No. I was in the systems department,
21 application development department for six years.
22 Q. And what did that entail?
23 A. I was a COBOL programmer.
24 Q. Okay. Bless you. So that would have
25 taken you until 1996 roughly?
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1 A. That's correct. So the fall of '96 I
2 moved into the actuarial department.
3 Q. And you have been there ever since?
4 A. Yes, I have.
5 Q. When did you take over responsibility
6 for underwriting as well as actuarial matters?
7 A. The fall of -- the fall of 2008.
8 Q. So the same time that you became
9 chief actuary?
10 A. Yes, it was the same time.
11 Q. Who was your predecessor as chief
12 actuary?
13 A. No one was in the role when I was
14 placed into the role.
15 Q. If no one had that title, who is the
16 most senior person in the actuarial department or
17 providing actuarial services at Blue Cross-Alabama?
18 A. At what time specifically?
19 Q. Right before you came on.
20 A. In what -- in 2008?
21 Q. Yes, sir.
22 A. I might have been the most senior
23 person at that point in time.
24 Q. Who was the second-most senior person
25 providing actuarial services when you took over the
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1 role of chief actuary?
2 A. I am pretty sure it was Jill Cullen.
3 Q. Okay. And how about behind
4 Ms. Cullen, who was the third back then?
5 A. I don't know that I remember.
6 Q. Okay. Was it Rusty Herrin by any
7 chance?
8 A. Rusty was there. But I'm not sure if
9 we had a designated third at that point in time.
10 Q. And is Mr. Herrin still employed at
11 Blue Cross of Alabama?
12 A. He is not employed there.
13 Q. Where is he today?
14 A. He left Blue Cross and went to Aetna.
15 Q. In Alabama?
16 A. My understanding, it is in Georgia.
17 Q. And do you know what his position is
18 at Aetna in Georgia?
19 A. I do not know what his position is at
20 Aetna.
21 Q. Do you keep in touch with him or did
22 you keep in touch with him after he left?
23 A. I have been in touch with him, yeah.
24 Q. Have you talked to him about this
25 case, about the litigation?
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1 A. I have not talked to him about the
2 case.
3 Q. When did he leave Blue Cross-Alabama?
4 A. About a year ago.
5 Q. And what were the circumstances?
6 A. He found another job he wanted to go
7 to.
8 Q. Was he considered a good employee, a
9 capable person at Blue Cross of Alabama?
10 A. Rusty was a good employee and was
11 capable.
12 Q. There was -- I'm sorry.
13 A. He was capable, yes.
14 Q. He was?
15 A. Yeah.
16 Q. Okay. So he didn't leave under
17 duress or anything like that?
18 A. Not that I am aware of, no.
19 Q. Do you know what his position is with
20 Aetna of Georgia?
21 MR. BURKHALTER: Object to the form.
22 You can answer.
23 A. I don't.
24 Q. (BY MR. SMITH:) Okay. Are y'all
25 personal friends, you and Mr. Herrin?
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1 A. I would -- I would say yes.
2 Q. Okay. When was the first time that
3 you became involved in any capacity with the rate
4 filings that Blue Cross-Alabama makes with the
5 Department of Insurance?
6 A. The first time?
7 Q. Yeah.
8 A. It was probably shortly after I moved
9 into the department.
10 Q. And that was --
11 A. So late --
12 Q. -- '96?
13 A. Late '96. Or '97 might be a better
14 year.
15 Q. Just -- let's focus for a moment on
16 '97 to 2008. So when you first got into the
17 actuarial business at Blue Cross-Alabama and before
18 you became chief actuary, was there any particular
19 person in charge of the rate filings during that
20 time span?
21 A. There was a -- there was a chief
22 actuary who was over the department, and there was
23 a manager who was over the department. I don't
24 know that they were necessarily designated as in
25 charge of the filings, but they were the managers.
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1 Q. Okay.
2 A. So maybe infer that they were in
3 charge of the filings.
4 Q. So who was the chief actuary, or if
5 there was more than one, who were they from ' 97 to
6 '08?
7 A. Terry Kellogg was the chief actuary.
8 Q. Okay. For that whole time?
9 A. He was until I think about '98.
10 Q. All right.
11 A. And then Janet McGowan was the chief
12 actuary from '98 to 2003.
13 Q. Okay. How about after that?
14 A. And then we did not have a designated
15 chief actuary from '03 to '08.
16 Q. And that is the period of time during
17 which I think you said that Ms. Cullen was the
18 senior-most person in the actuarial department?
19 A. Well, when I became chief actuary in
20 late '08, Jill was probably the second person most
21 senior. Prior to that, there was somebody who was
22 the manager of the department, a gentleman named
23 Tom Fiddler.
24 Q. How is the last name spelled?
25 A. F-I-D-D-L-E-R.
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1 Q. So between 2003 and 2008, he was the
2 most senior person in actuarial services and had
3 the title of manager?
4 A. For the most part, yes.
5 Q. And Mr. Fiddler, is he still there
6 today?
7 A. He is not.
8 Q. Where is he now?
9 A. He passed away in '07.
10 Q. I'm sorry to hear that. Okay. How
11 about Ms. McGowan, she is not there, is she?
12 A. She is not there.
13 Q. Is she still living?
14 A. Yes, as far as I know.
15 Q. Do you know where she is today?
16 A. I know she lives in Hoover, Alabama.
17 Q. So she is retired or --
18 A. She left -- she went home to be a
19 full-time mom.
20 Q. I see. Let me ask you to focus,
21 then, on the time period where you were chief
22 actuary and played, as I understand it, a leading
23 role in the submission of these rate filings.
24 During that -- those approximately eight years, who
25 else was involved besides you in preparing and then
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1 finalizing these rate filings?
2 A. In 2008 to 2013?
3 Q. Well, I actually meant until today.
4 Yeah, 2008 until 2016.
5 A. Actuarial staff would be involved in
6 terms of the rate filings.
7 Q. Yeah. No, I get that, that you would
8 have your staff help you. Are there -- is there
9 anyone in particular who would do it?
10 A. It would vary. Rusty -- you
11 mentioned Rusty. Rusty helped with small group
12 filings.
13 Q. Okay.
14 A. Jill would have helped with filings.
15 Q. Okay.
16 A. Susan Sexton would have helped with
17 rate filings.
18 Q. Did she have a particular role?
19 A. I don't think she has worked on
20 individual or small group products. She worked --
21 she has worked on our Med sup product.
22 Q. Okay. That is Medicare supplement?
23 A. Yes.
24 Q. Okay. Anybody else?
25 A. More than likely any -- people on
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1 staff have probably helped in some capacity.
2 Q. But in terms of people who have
3 played the more significant roles, it is
4 Mr. Herrin, Ms. Cullen and Ms. Sexton; is that
5 fair?
6 A. I think that is fair. Cameron Daniel
7 has played a significant role more recently.
8 Q. I have seen a letter that has been
9 submitted with each rate filing that is authored or
10 signed by you and seems to be changed only a little
11 bit from year to year. You are familiar with that
12 form of letter?
13 A. Yes.
14 Q. Okay. Who prepared the template that
15 that comes from?
16 MR. BURKHALTER: Object to the form.
17 You can answer.
18 A. I don't know that we really have
19 somebody that prepared a template. We have used a
20 similar format, I think, since I have been there,
21 but I don't know that we have a template per se.
22 But you could say we used, you know, prior
23 years' -- prior year letters as the starting point
24 to say what are we going to put in our cover
25 letter.
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1 Q. (BY MR. SMITH:) Okay. I have seen
2 the name Serena Calhoun. Is she someone who has
3 worked on these rate filings?
4 A. Serena has worked on the rate
5 filings.
6 Q. And what kind of things has she done?
7 A. Generally I would say she has
8 probably helped gather experience data, which would
9 consist of claims experience, enrollment
10 experience. She might have attended some meetings
11 with -- yeah, she might have attended some meetings
12 with other folks in the company.
13 Q. Other than people on the actuarial
14 staff at Blue Cross of Alabama, have you consulted
15 with anyone else, first of all, at Blue Cross of
16 Alabama in order to prepare and finalize the rate
17 filings that you have made from 2008 until now?
18 A. Will you ask that one more time?
19 Sorry.
20 Q. In order to prepare your rate
21 filings, you obviously talked to other people in
22 the actuarial department.
23 A. Yeah.
24 Q. And you have identified those, right?
25 A. Right.
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1 Q. All right. Are there other people at
2 Blue Cross of Alabama that you have consulted with
3 in order to prepare those filings?
4 A. Yes. I would say --
5 Q. Okay. And why don't we start at sort
6 of like the most senior level, so like top
7 management. Is there anyone in top management that
8 you have consulted with in order to prepare those
9 rate filings?
10 MR. BURKHALTER: Object to the form.
11 A. Yes.
12 Q. (BY MR. SMITH:) And who is that?
13 MR. BURKHALTER: Go ahead.
14 A. Well, I would consult with my boss.
15 Q. (BY MR. SMITH:) Who is?
16 A. Cindi Vice.
17 Q. Okay.
18 A. She is the chief financial officer.
19 Q. Anyone else?
20 A. I consult with senior management over
21 marketing and the president.
22 Q. I'm sorry. I should know this, but
23 who is the president of Blue Cross-Alabama?
24 A. Terry Kellogg.
25 Q. Oh, okay. And what kinds of issues
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1 or questions have you addressed with Mr. Kellogg
2 and Ms. Vice about -- that relate to those rate
3 filings?
4 A. I don't recall their specific
5 questions. In general, we would talk about the
6 filing, what the rates needed to be, changes to
7 benefits.
8 Q. Right.
9 A. I think generally things about how
10 the product is going to be priced and sold,
11 distribution channels --
12 Q. Who --
13 A. -- renewals.
14 MR. SMITH: I'm sorry. I didn't mean
15 to cut him off.
16 A. It is pretty broad. I would think
17 most things related to administration of a product.
18 Q. (BY MR. SMITH:) Who made the final
19 decision on what rates to submit and file with the
20 Department of Insurance from 2008 until now?
21 A. I don't know that there's one person
22 that made the final decision.
23 Q. Well, each time you made a rate
24 filing you had to put a base rate and adjustment
25 factors into your filing, correct?
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1 A. Correct.
2 Q. So who had the final say-so on what
3 the base rate was going to be?
4 A. I think -- like I say, I think the
5 final rate increase would have approval from senior
6 management.
7 Q. Senior management meaning the CFO or
8 the CEO?
9 A. Yes.
10 Q. Were there ever situations where the
11 data that you had justified a larger request for a
12 rate increase than the one that you actually made?
13 A. Where the data said we needed a
14 higher rate increase than what we --
15 Q. Yes.
16 A. Yeah, there were situations like
17 that.
18 Q. Okay. And in situations like that,
19 who made the decision on where to end up on the
20 rate, what rate to actually put in your filing?
21 MR. BURKHALTER: Object to the form.
22 You can answer.
23 A. I struggle to say there was one
24 person. There was agreement on what we would ask
25 for or propose in terms of the rate filing. And we
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1 would have senior management's okay on what we
2 asked for.
3 Q. (BY MR. SMITH:) So is it accurate to
4 say you wouldn't make a rate filing, put your
5 signature on your letter, sign your actuarial
6 certification until you had senior management's
7 okay on the rate that you were seeking?
8 A. That is -- that is fair to say that.
9 Q. Speaking of actuarial certifications,
10 is it true that each time you made a rate
11 submission to the Department of Insurance, you did
12 submit an actuarial memorandum with it?
13 A. I don't think we submitted one with
14 every filing from '08 to '13.
15 Q. Is that something -- well, which ones
16 didn't you submit one with?
17 A. I don't recall specifically.
18 Q. Okay.
19 A. I would have to look at the filings.
20 Q. You did submit an actuarial
21 certification in each case, right?
22 A. I am not positive that we did.
23 Q. Okay. Well, let me ask the question
24 this way. In the cases where you did submit an
25 actuarial certification with your rate filings, did
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1 you personally sign it from '08 until now?
2 A. I signed most of them. I don't think
3 I signed all of them.
4 Q. All right. The ones that you did
5 sign, did you intend that as a statement that the
6 submission you were making to the Department of
7 Insurance was truthful?
8 A. Yes.
9 Q. Accurate? Yes?
10 A. When you say accurate, what do you
11 mean?
12 Q. Do you not know what the word
13 "accurate" means?
14 A. Well, I do know what it means but --
15 Q. Well, I mean in it's common sense.
16 Did you --
17 A. In common sense, yes. Yeah.
18 Q. Okay. Did you intend it as a
19 certification that your submission was not
20 misleading?
21 A. Yes.
22 Q. And did you intend it as a
23 certification that your submission was complete?
24 A. Yes.
25 Q. And that it stated all of the factors
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1 that go into determining the base rate and the
2 adjustment factors for that particular product or
3 that particular line of business?
4 A. Well, I don't think the certification
5 necessarily states -- when you say "all of that,"
6 there are probably things that a reviewer wouldn't
7 be able to find in the filings. So when you say --
8 when you say "all," I'm not sure what that might
9 include. But we felt like our filings had
10 sufficient data in them for the reviewer to review
11 our rates and our request. And we would always be
12 open to additional discussion if needed.
13 Q. Well, let me ask the question a
14 little differently. Let's pan back from the
15 certification.
16 A. Yes.
17 Q. Certification is part of the rate
18 submission, right?
19 A. I am going to say yes.
20 Q. Okay. Good. Again, not a trick
21 question. All right. When you made rate
22 submissions to the Department of Insurance, which
23 included various things such as your certification,
24 did you intend those submissions to include all of
25 the facts that state the rate and the adjustment
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1 factors that would be used to calculate rates for
2 particular insureds for that product for that line
3 of business?
4 A. The filings would have kind of rate
5 development. And we would come up with what we
6 might call a base rate. And then we would also
7 list the adjustment factors that were used if
8 rating adjustment factors were allowed. And then
9 we would probably typically include a rate sheet to
10 show here is what the rates are for particular
11 insureds.
12 Q. Right. And when you made those
13 submissions and listed those adjustment factors,
14 did you list all of the adjustment factors that
15 were used to calculate rates for insureds?
16 A. We tried to include all the factors.
17 Q. And to the best of your knowledge,
18 did you include all of the factors for the rate
19 submissions that you were involved in?
20 A. You say to the best of my knowledge.
21 Q. Yeah.
22 A. Could you explain your question a
23 little bit more?
24 Q. I can't be much more specific. You
25 told me that your submissions include base rates
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1 and adjustment factors. The question is whether,
2 when you made those submissions under your
3 authority, did you, to the best of your knowledge,
4 include all of the adjustment factors that were
5 used to change or adjust rates?
6 A. Yes. Yeah. Sorry.
7 Q. We talked a moment ago about the fact
8 that there were some situations where the facts
9 would justify a higher rate than the one that you
10 sought. Okay. I am just going back to that. All
11 right.
12 In situations like that, did you ever
13 model the effect of different rates on your
14 business, your market share or anything like that?
15 A. We would -- we would model the impact
16 in terms of financials, you know, if we put in a
17 ten percent rate increase versus an eight percent
18 rate increase. So we would model it regarding, you
19 know, enrollment and how much premium that
20 generates, yes.
21 Q. Did you also model the effect on
22 market share?
23 A. I don't remember us modeling the
24 effect on market share. There were probably times
25 in recent filings where market share is more -- is
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1 mentioned in filings, particularly in the ACA
2 world.
3 Q. All right. Let me ask you about a
4 couple of people in your actuarial department.
5 Danika Turner, do you know that name?
6 A. I do.
7 Q. All right. And I'm sorry. Danika,
8 is that a woman?
9 A. It is, yes.
10 Q. Was Danika involved at all in rate
11 submissions?
12 A. She might have been involved in
13 gathering data. Danika is no longer with the
14 company.
15 Q. Okay.
16 A. I remember her working on Medicare
17 Advantage.
18 Q. All right. How about Kyle Hermos?
19 A. Kyle Harman?
20 Q. Harman. Sorry.
21 A. Kyle Harman. Kyle is no longer with
22 the company, but he did work on some rate filings.
23 Which ones in particular, I can't say that I
24 remember.
25 Q. Do you know where Mr. Harman is
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1 today?
2 A. Not exactly. I think he went to
3 Orlando.
4 Q. Is he with a health insurer?
5 A. I don't think he is.
6 Q. What was your compensation last year
7 from Blue Cross of Alabama?
8 A. I don't remember exactly.
9 Q. Can you give me a ballpark?
10 A. It was -- it was close to a million
11 dollars.
12 Q. Close? Higher or lower?
13 A. A little bit higher.
14 Q. And when I say compensation, from all
15 sources, including bonuses, things like that?
16 A. Yes.
17 Q. Is any part of your compensation tied
18 to performance at the company?
19 A. Yes.
20 Q. And tell me how that works. What is
21 the relationship? What is the metric, I should
22 say?
23 A. We have corporate goals. There's a
24 financial goal and a membership goal, a market
25 goal, I think, and then a service goal.
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1 MR. BURKHALTER: Cy, at some point in
2 the next, say, five or ten minutes when you reach a
3 stopping point, let's take a short break.
4 MR. SMITH: Just about there.
5 MR. BURKHALTER: Thank you.
6 Q. (BY MR. SMITH:) Okay. What are
7 the -- give me an example of corporate goals.
8 A. Net income before tax being a
9 particular number.
10 Q. Membership, that is the number of
11 members, right?
12 A. It is. It is related to that.
13 Q. That must be a tough one to continue
14 to exceed in Alabama. Do you have a market share
15 goal?
16 A. Not that I am aware of.
17 Q. And then what's the -- the third one,
18 I have something down about market or service?
19 A. Service.
20 Q. Okay. So that is quality of service
21 provided or -- is that right?
2