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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

Noel Carden 2


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

12 [email protected]


14


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


22 205.322.8880


24

25

Noel Carden 3


1 A P P E A R A N C E S (Continuing)

2


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


14 Mr. Barry A. Ragsdale

15 Attorney at Law

16 Sirote & Permutt, P.C.

17 2311 Highland Avenue South


19 205.930.5100


21

22

23

24

25

Noel Carden 4



2


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


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

Noel Carden 5



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


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

Noel Carden 6



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


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


23 205.254.1000



Noel Carden 7



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

Noel Carden 8



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


Noel Carden 9



2

3 OTHERS PRESENT:

4 Mr. Michael J. Velezis

5 Vice President, Legal Services

6 450 Riverchase Parkway East


8 205.220.5384

9 [email protected]

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


Noel Carden 10



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

9 [email protected]

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

Noel Carden 11


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)


18 (Alabama Department of Insurance

19 Insurance Regulation, Chapter 482-1-116,

20 Alabama Small Employer Allocation Program)


22 CONFIDENTIAL (Letter dated March 28,

23 2008, from Carden to Bell, beginning with

24 Bates Number BCBSAL_0000001975)

25

Noel Carden 12


1

2 INDEX OF PLAINTIFFS' EXHIBITS, CONTINUING

3

4

5 Page:


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)


12 CONFIDENTIAL (Editing Error Report

13 for ID B14480, beginning with Bates Number

14 BCBSAL_0000049405)


16 CONFIDENTIAL (Earned Income for June

17 2012 by LOB, beginning with Bates Number

18 BCBSAL_0000049461)


20 CONFIDENTIAL (Collective documents,

21 beginning with Bates Number

22 BCBSAL_0000180968)

23

24

25

Noel Carden 13


1 INDEX OF PLAINTIFFS' EXHIBITS, CONTINUING

2

3 Page:


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)


12 (Email chain, beginning with Bates

13 Number ALDO1_000000151)


15 (Email chain, beginning with Bates

16 Number ALDO1_000000185)


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

Noel Carden 14


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

Noel Carden 15


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.

Noel Carden 16


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

Noel Carden 17


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.

Noel Carden 18


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.

Noel Carden 19


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?

Noel Carden 20


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

Noel Carden 21


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?

Noel Carden 22


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.

Noel Carden 23


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?

Noel Carden 24


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

Noel Carden 25


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.

Noel Carden 26


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?


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

Noel Carden 27


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?


22 You can answer.

23 A. More than --

24 MR. BURKHALTER: Sorry.

25 A. More than half the time, I would say.

Noel Carden 28


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

Noel Carden 29


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,

Noel Carden 30


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

Noel Carden 31


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.

Noel Carden 32


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

Noel Carden 33


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.

Noel Carden 34


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?

Noel Carden 35


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?

Noel Carden 36


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?


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

Noel Carden 37


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.

Noel Carden 38


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?


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

Noel Carden 39


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.

Noel Carden 40


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.

Noel Carden 41


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.

Noel Carden 42


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

Noel Carden 43


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.

Noel Carden 44


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?


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

Noel Carden 45


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?

Noel Carden 46


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

Noel Carden 47


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

Noel Carden 48


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

Noel Carden 49


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?

Noel Carden 50


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

Noel Carden 51


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?

Noel Carden 52


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?


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?

Noel Carden 53


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.

Noel Carden 54


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.

Noel Carden 55


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

Noel Carden 56


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

Noel Carden 57


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?


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.

Noel Carden 58


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.

Noel Carden 59


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?


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

Noel Carden 60


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?

Noel Carden 61


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?


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

Noel Carden 62


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

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