Department of Civil Service

PA06-24

TO: Participating Agency Health Benefit Administrators
FROM: Robert W. DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: December 1, 2006

Enclosed are the Third Quarter Empire Plan Experience Report for 2006 and the cover letter to the Chief Executive Officers. This report presents the projected 2006 Empire Plan experience and approved 2007 premium rates.

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December 1, 2006

Dear Chief Executive Officer:

Attached is the Empire Plan Third Quarter Experience Report for 2006. This report presents the projected 2006 Empire Plan experience, based on claims paid through September 30, 2006, as well as the approved 2007 premium rates.

For Plan Year 2006, the Empire Plan carriers project a net dividend of $333.0 million, 7.0% of premium. The report explains the basis for this projection and future reports will include revisions based on additional claims experience. The approved 2007 premium rates are presented in Exhibit II and reflect a net rate increase of 4.7% in aggregate.

I hope this report is informative and useful to you. If you have any questions, comments or suggestions, please don’t hesitate to contact me.

Sincerely,

Robert W. DuBois, CEBS
Director
Employee Benefits Division

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EMPIRE PLAN EXPERIENCE REPORT

JULY – SEPTEMBER 2006
Produced for
PARTICIPATING AGENCIES IN THE
NEW YORK STATE
HEALTH INSURANCE PROGRAM
by
the Employee Benefits Division
New York State Department of Civil Service
Daniel E. Wall
President, New York State Civil Service Commission

• Projected 2006 Empire Plan Experience
• Projected 2007 Premium Rates

Exhibits

1. Projected 2006 Empire Plan Experience
2. 2007 Approved PA Premium Rates
3. Empire Plan PA 5-Tier Group Rates 1996-2007
4. Empire Plan PA 2-Tier Group Rates 1996-2007

• NYSHIP News

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NEW YORK STATE HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
3rd QUARTER REPORT

PROJECTED 2006 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $333.0 million (7.0% of premium), or $236.1 million more than the margin loaded in the 2006 rates. The 2006 annual experience projected by the insurance carriers is reported in Exhibit I.

This projection is based on nine months of 2006 paid claim data. The following chart presents the percentage of the projected incurred claims actually paid as well as the current 2006 trend as compared to the trend assumed during the 2006 rate development:

	% of Paid Claims to Projected Incurred Claims		Projected 2006 Trend
	2005	2006	@ Renewal	@ 3rd Quarter
Blue Cross	98.9%	61.4%	13.8%	12.0%
UnitedHealthcare	99.7%	63.7%	10.3%	13.0%
GHI	99.1%	59.8%	4.5%	3.2%
Blue Cross Rx	100.0%	71.2%	16.2%	10.6%

The 2006 projected dividend for each carrier as compared to the margin level used in the 2006 premium development is as follows:

	Margin	2006 Projected Dividend/(Loss)	Increase/(Decrease)
Blue Cross	$26,222,000	$151,748,000	$125,526,000
UnitedHealthcare	$47,285,000	$9,558,000	($37,727,000)
GHI	$2,628,000	$8,645,000	$6,017,000
Blue Cross Rx	$20,771,000	$163,030,000	$142,259,000
Total	$96,906,000	$332,981,000	$236,075,000

The increase in the dividend projection is primarily attributable to the decrease in the 2005 claims base projected during the development of the 2006 rates for the prescription drug and hospital programs coupled with an increase in the projected pharma revenue for the prescription drug program. UHC projects a moderate increase in the 2006 claims based on an increase in recent medical utilization which UHC projects to continue throughout 2006. For GHI, the increase in the dividend projection is primarily attributable to the decrease in their projected 2005 claims base.

2007 PREMIUM RATES

Exhibit II presents the approved 2007 Empire Plan gross and net premium rates. In aggregate, the Empire Plan gross premium increases 7.7% while the net premium increases 4.7%. The 2007 rates are based on a 2006 premium level generating a 7.0% dividend, an aggregate trend of 12.4% and a margin level equal to 2.6% of premium. In addition, $300.0 million in all-payor dividend was used to mitigate the net premium increase.

Also, contributing to this favorable rate increase is the use of retrospective premium arrangements. A retro premium arrangement provides for the payment of a reduced premium level throughout the year with a provision for an additional premium payment at settlement in the event that claims and expenses exceed the premium paid throughout the year. This strategy is used when we believe the carriers’ premium demand is overly conservative. Any necessary retrospective premium payment would be funded through available dividends. While the retro premium liability is approximately $76.3 million, the State and its benefit consultant, Buck Consultants, do not expect that any retro payment will be necessary.

Exhibit III presents the individual and family rate history for the Core Plus Medical and Psychiatric Enhancements option based on the five-tier Empire Plan billing rate history in effect since January 1, 1996. Exhibit IV presents, for illustrative purposes only, the two-tier rate history from 1996 to 2007.

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Exhibit I

2006 PROJECTED EMPIRE PLAN EXPERIENCE
In (000's)

	EMPIRE BLUE CROSS	UnitedHealthcare MEDICAL Core	UnitedHealthcare MEDICAL NY Enhancement	UnitedHealthcare MEDICAL PA Enhancement	UnitedHealthcare MEDICAL Combined	GHI MHSA Core	GHI MHSA NY Enhancement	GHI MHSA PA Enhancement	GHI MHSA Combined	CIGNA	TOTAL
(A) Premium (1)	1,501,579	1,411,680	187,628	174,073	1,773,381	77,639	10,656	7,669	95,972	1,413,766	4,784,698
(B) Incurred Claims (2)	1,250,124	1,320,396	157,475	139,156	1,617,027	57,507	8,099	6,261	71,867	1,182,229	4,121,247
(C) Administrative Expense (3)	99,707	124,301	11,927	10,568	146,796	12,491	1,719	1,250	15,460	68,507	330,470
(D) Gain/(Loss) (A-B-C)	151,748	(33,017)	18,226	24,349	9,558	7,641	838	166	8,645	163,030	332,981

(1) Earned Premium - Premium which pays for coverage for the period reported (accrual basis).
(2) Incurred Claims - Represents the cost of covered services provided during the period reported by the insurance company (accrual basis).
(3) Administrative Expenses - All charges by the insurance carrier other than for the payment of claims. Includes carrier’s cost to administer the program, interest charges, and other retention.

Source: Carrier 2006 3rd Quarter Reports

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Exhibit II

Empire Plan
Participating Agency Premium Rates
Comparison of 2006 and 2007 Rates
Mediprime Rate Structure

CORE ONLY

Plan Prime

	Gross Rates(1) 2006	Gross Rates(1) 2007	Gross Rates(1) % Change	Net Rates(2) 2006	Net Rates(2) 2007	Net Rates(2) % Change
Individual	490.93	527.60	7.5%	472.92	491.95	4.0%
Family	1,039.70	1,116.82	7.4%	1,001.94	1,041.38	3.9%

Medprime

	Gross Rates(1) 2006	Gross Rates(1) 2007	Gross Rates(1) % Change	Net Rates(2) 2006	Net Rates(2) 2007	Net Rates(2) % Change
Individual	344.41	346.35	0.6%	323.97	316.56	-2.3%
Family - 1 medicare	893.19	935.57	4.7%	852.99	866.00	1.5%
Family - 2 medicares	746.68	754.33	1.0%	704.04	690.63	-1.9%

(1) Represents premiums charged by the carriers.
(2) Represents cost to a participating agency.

CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

Plan Prime

	Gross Rates(1) 2006	Gross Rates(1) 2007	Gross Rates(1) % Change	Net Rates(2) 2006	Net Rates(2) 2007	Net Rates(2) % Change
Individual	547.86	600.69	9.6%	529.76	564.84	6.6%
Family	1,164.16	1,273.96	9.4%	1,126.19	1,198.07	6.4%

Medprime

	Gross Rates(1) 2006	Gross Rates(1) 2007	Gross Rates(1) % Change	Net Rates(2) 2006	Net Rates(2) 2007	Net Rates(2) % Change
Individual	359.35	363.02	1.0%	338.88	333.18	-1.7%
Family - 1 medicare	975.66	1,036.30	6.2%	935.32	966.44	3.3%
Family - 2 medicares	787.16	798.65	1.5%	744.45	734.81	-1.3%

(1) Represents premiums charged by the carriers.
(2) Represents cost to a participating agency.

 

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Exhibit III

EMPIRE PLAN
PA 5 TIER GROUP RATES
1996-2007 Monthly Rates

Core Plus Medical & Psychiatric Enhancements

Individual Planprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
1996 (3)	234.59	9.3%	207.66	7.3%
1997	261.80	11.6%	240.22	15.7%
1998	267.89	2.3%	246.07	2.4%
1999	279.56	4.4%	261.18	6.1%
2000	294.94	5.5%	286.53	9.7%
2001	325.23	10.3%	314.26	9.7%
2002	353.81	8.8%	344.66	9.7%
2003	400.00	13.1%	384.89	11.7%
2004	448.00	12.0%	438.15	13.8%
2005	490.41	9.5%	478.49	9.2%
2006	547.86	11.7%	529.76	10.7%
2007	600.69	9.6%	564.84	6.6%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	9.0%	9.4%
Most Recent 5 Years	11.2%	10.4%

Family Planprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
1996 (3)	521.96	7.2%	459.16	4.3%
1997	537.96	3.1%	489.22	6.5%
1998	552.00	2.6%	503.78	3.0%
1999	573.33	3.9%	531.89	5.6%
2000	607.33	5.9%	590.16	11.0%
2001	673.67	10.9%	651.09	10.3%
2002	742.98	10.3%	723.97	11.2%
2003	842.38	13.4%	811.41	12.1%
2004	945.29	12.2%	924.74	14.0%
2005	1,038.64	9.9%	1,013.68	9.6%
2006	1,164.16	12.1%	1,126.19	11.1%
2007	1,273.96	9.4%	1,198.07	6.4%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.4%	8.7%
Most Recent 5 Years	11.4%	10.6%

Individual Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
1996 (3)	158.65	-26.1%	131.72	-31.9%
1997	150.53	-5.1%	129.28	-1.9%
1998	167.91	11.5%	151.34	17.1%
1999	186.46	11.0%	175.61	16.0%
2000	217.94	16.9%	214.25	22.0%
2001	245.64	12.7%	239.94	12.0%
2002	259.96	5.8%	253.82	5.8%
2003	307.02	18.1%	297.50	17.2%
2004	341.87	11.4%	334.22	12.3%
2005	340.50	-0.4%	331.93	-0.7%
2006	359.35	5.5%	338.88	2.1%
2007	363.02	1.0%	333.18	-1.7%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.2%	5.7%
Most Recent 5 Years	7.1%	5.9%

Family - 1 Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
1996 (3)	446.03	-8.4%	383.23	-13.0%
1997	427.23	-4.2%	378.82	-1.2%
1998	452.73	6.0%	409.76	8.2%
1999	480.95	6.2%	447.05	9.1%
2000	530.97	10.4%	518.52	16.0%
2001	595.25	12.1%	577.95	11.5%
2002	649.14	9.1%	633.13	9.5%
2003	749.40	15.4%	724.05	14.4%
2004	839.18	12.0%	820.82	13.4%
2005	888.71	5.9%	867.09	5.6%
2006	975.66	9.8%	935.32	7.9%
2007	1,036.30	6.2%	966.44	3.3%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.7%	7.1%
Most Recent 5 Years	9.9%	8.9%

Family - 2 or More Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
1996 (3)	369.87	-24.0%	307.07	-30.3%
1997	315.24	-14.8%	267.15	-13.0%
1998	351.98	11.7%	314.25	17.6%
1999	387.05	10.0%	360.66	14.8%
2000	453.22	17.1%	445.51	23.5%
2001	514.40	13.5%	502.37	12.8%
2002	555.29	7.9%	542.29	7.9%
2003	656.42	18.2%	636.67	17.4%
2004	733.05	11.7%	716.88	12.6%
2005	738.79	0.8%	720.53	0.5%
2006	787.16	6.5%	744.45	3.3%
2007	798.65	1.5%	734.81	-1.3%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.0%	5.5%
Most Recent 5 Years	7.7%	6.5%

(1) Represents premiums paid to the carriers.
(2) Represents cost to a participating agency.
(3) Inception of Medprime Rate Structure.

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Exhibit IV

EMPIRE PLAN
PA 2 TIER GROUP RATES
1996-2007 Monthly Rates
(For Illustrative Purposes Only)

Core Plus Medical & Psychiatric Enhancement

Individual

Year	Gross Rate	% Change	Net Rate	% Change
1996 (1)	219.20	2.1%	192.27	-0.7%
1997	219.87	0.3%	198.37	3.2%
1998	227.35	3.4%	204.38	3.0%
1999	239.24	5.2%	222.00	8.6%
2000	260.67	9.0%	253.98	14.4%
2001	289.41	11.0%	280.25	10.3%
2002	313.58	8.4%	305.67	9.1%
2003	357.44	14.0%	345.36	13.0%
2004	402.70	12.7%	394.31	14.2%
2005	433.70	7.7%	423.31	7.4%
2006	477.33	10.1%	459.25	8.5%
2007	511.23	7.1%	477.96	4.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.2%	8.1%
Most Recent 10 Years	8.8%	9.3%
Most Recent 5 Years	10.3%	9.4%

Family

Year	Gross Rate	% Change	Net Rate	% Change
1996 (1)	491.07	0.8%	428.27	-2.7%
1997	495.81	1.0%	447.22	4.4%
1998	514.28	3.7%	463.62	3.7%
1999	539.14	4.8%	499.75	7.8%
2000	578.26	7.3%	563.03	12.7%
2001	640.64	10.8%	619.28	10.0%
2002	703.61	9.8%	685.83	10.7%
2003	805.64	14.5%	778.82	13.6%
2004	899.98	11.7%	881.48	13.2%
2005	968.40	7.6%	945.11	7.2%
2006	1,073.28	10.8%	1,034.40	9.4%
2007	1,158.16	7.9%	1,084.90	4.9%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.6%	8.5%
Most Recent 10 Years	8.9%	9.3%
Most Recent 5 Years	10.5%	9.7%

(1) Represents 2 tier Empire Plan Rates; See 5 tier rate schedule effective 1/1/96.

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Third Quarter – 2006

Medicare Part D Employer Subsidy Update

In addition to the Employer Subsidy received for the first quarter of 2006 (January through March), NYSHIP applied for and received an estimated Employer Subsidy for the second quarter of 2006 (April through June), and for the months of July and August. Consistent with our commitment to distribute the subsidy to each Participating Agency as soon as possible after receiving it, we have continued to credit the monthly bills for those PAs that have executed the Medicare Part D Retiree Drug Subsidy Agreements. These agreements were initially mailed to all PAs in March; follow up reminders have been sent and calls have been made to those PAs that have not yet returned their agreements. Please note that your agency must execute and return this agreement to EBD to begin receiving the subsidy credit. The Employer Subsidy for the second quarter of 2006 was credited to the December bill and the Subsidy for July and August will be credited to the January 2007 bill.

We anticipate that we will be able to begin submitting monthly data very soon and distributing subsidy payments as soon as possible following receipt from CMS. We will keep you informed.

GASB 45 Update

In addition to the information previously provided to your agency regarding GASB 45 (PA Memo 06-11 and PA Memo 06-18), NYSHIP will also provide agency census reports upon request. Since the data included in these reports will be current at the time they are provided, it is important that your agency NYBEAS file is up-to-date, including correctly identifying and coding retirees before requesting census reports. To request a copy of your agency’s census information, please send an e-mail to: Melinda.Beyer@cs.state.ny.us and include your name, agency name & code number, mailing address, phone number and e-mail address.

Medicare Part B Premium for 2007

The Centers for Medicare and Medicaid Services (CMS) have announced an increase of $5.00 (5.6%) in the standard Medicare Part B premium. Accordingly, the calendar year 2007 Medicare Part B enrollee reimbursement will be $93.50 per month. If a Medicare primary enrollee or dependent is required to pay more than the standard Medicare Part B premium because of income or late enrollment, PAs are not required to reimburse any amount in excess of the standard premium.

PA Regional Meetings

The 2006 Participating Agency Regional Meetings were an overwhelming success. Nearly 600 PA representatives attended the meetings – thank you all for coming!

NYSHIP Data/Reports

The Employee Benefits Division would like to be more responsive to the data needs of Participating Agencies. We will be working with our systems staff over the next few months and your inputs regarding the types of data/reports you need would be very helpful to us. We would appreciate it if you would take a few moments to complete the attached questionnaire and fax it to Debbie D’Orazio at (518) 473-3292. Thank you for your assistance.

NYSHIP Representation at Municipal Events

During the next quarter, NYSHIP’s Empire Plan will be represented at the following events:

• The 2007 Legislative Conference sponsored by the NYS Association of Counties on January 29-30, 2007, in Albany, New York.
• The 2007 Annual Meeting sponsored by the Association of Towns of the State of New York on February 18-20, 2007, in New York City.
• The 2007 Legislative Conference sponsored by the NYS Conference of Mayors on February 25-27, 2007, in Albany, New York.

If you are planning to attend an event, please stop by the NYSHIP exhibit.

Transmission of Reports Electronically

Many agencies receive the Empire Plan Experience Report via E-mail. If you would like to be added to our distribution list, you may contact us at the address or E-mail below.

CEO & HBA Name and Address Changes

Please be sure to notify EBD of any changes in the names and/or addresses (including E-mail address) of your agency’s CEO or HBA, so that we may keep our mailing lists up-to-date. This updated information should be sent to:

Debbie D’Orazio
Employee Benefits Division
NYS Department of Civil Service
Alfred E. Smith State Office Building
80 South Swan Street
Albany, NY 12239
or E-mail: Deborah.Dorazio@cs.state.ny.us

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Report – PDF Version

Exhibits I – PDF Version

Exhibits II – PDF Version

Exhibits III – PDF Version

Exhibits IV – PDF Version

NYSHIP News – PDF Version