Department of Civil Service

PA07-03
PA03-07

TO: Participating Agency Health Benefit Administrators
FROM: Robert W. DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: February 28, 2007

Enclosed are the Fourth 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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February 28, 2007

Dear Chief Executive Officer:

Attached is the Empire Plan Fourth Quarter Experience Report for 2006.  This report presents the projected 2006 Empire Plan experience based on claims paid through December 31, 2006, as well as the projected 2008 premium rates.

The Empire Plan carriers project a 2006 net dividend of $378.0 million, 7.9% of premium.  The report explains the basis for this projection.  The carriers will issue the 2006 experience statement on March 15, 2007.

The projected 2008 premium rates are presented in Exhibit II and reflect a “best-estimated” net rate increase of 12.1%, in aggregate.  The report also presents a range of the potential 2008 rate increase for your budget development considerations.

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

OCTOBER - DECEMBER  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
Nancy G. Groenwegen
President, New York State Civil Service Commission

• Projected 2006 Empire Plan Experience
• Projected 2008 Premium Rates

Exhibits

1. Projected 2006 Empire Plan Experience
2. Projected 2008 PA Premium Rates
3. Empire Plan PA 5-Tier Group Rates 1996-2008
4. Empire Plan PA 2-Tier Group Rates 1996-2008

• NYSHIP News

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NEW YORK STATE HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
4th QUARTER REPORT

PROJECTED 2006 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $378.0 million (7.9% of premium), or $281.1 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 twelve 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	@ 4th Quarter
Blue Cross	99.3%	86.1%	13.8%	10.0%
UnitedHealthcare	99.7%	85.1%	10.3%	11.9%
GHI	99.8%	89.1%	4.5%	4.3%
Blue Cross Rx	100.0%	97.5%	16.2%	9.8%

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	$169,358,000	$143,136,000
UnitedHealthcare	$47,285,000	$31,889,000	($15, 396,000)
GHI	$2,628,000	$8,580,000	$5,952,000
Blue Cross Rx	$20,771,000	$168,203,000	$147,432,000
Total	$96,906,000	$378,030,000	$281,124,000

The increase in the dividend projection is primarily attributable to the experience improvement on the prescription drug and hospital programs.  For the hospital program, the $143 million increase in projected dividend is attributable to both a $60 million reduction in the projected 2005 claim base coupled with a 2006 trend that is 3.8% lower than the trend initially projected.  For the prescription drug program, the increase in projected dividend is due to a reduction in the 2005 claim base, a 2006 trend that is 6.4% lower than the trend used in developing the 2006 premium and an increase in the projected pharma revenue receipts.  For GHI, the increase in the projected dividend is primarily attributable to the decrease in the projected 2005 claim base since the development of the 2006 premium.  UHC projects modestly higher claims for 2006 as compared to the amount of claims projected in the 2006 premium development resulting in a projected dividend that is slightly less than the margin loaded.

2008 PROJECTED PREMIUM RATES

Exhibit II presents the projected 2008 Empire Plan gross and net premium rates assuming the application of $285.1 million in dividend to all payors.  In aggregate, the Empire Plan gross premium is projected to increase approximately 11.3% while the net premium is projected to increase approximately 12.1%.   

A range of projected gross and net premium rates is also included (8.7% - 15.4%).  It should be noted that carrier rate projections made at this time of the year have been historically conservative.  Each agency should assess its budgetary environment in using the enclosed projections.

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 2008.

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Exhibit I

2006 PROJECTED EMPIRE PLAN EXPERIENCE
In (000's)

	BLUE CROSS HOSPITAL	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	Blue Cross Drug	TOTAL
(A) Premium (1)	1,503,655	1,412,398	187,448	174,553	1,774,399	77,905	10,699	7,696	96,300	1,416,120	4,790,474
(B) Incurred Claims (2)	1,235,397	1,289,936	161,948	145,392	1,597,276	57,713	8,483	6,053	72,249	1,179,880	4,084,802
(C) Administrative Expense (3)	98,900	122,788	11,844	10,602	145,234	12,496	1,731	1,244	15,471	68,037	327,642
(D) Gain/(Loss) (A-B-C)	169,358	(326)	13,656	18,559	31,889	7,696	485	399	8,580	168,203	378,030

(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 4th Quarter Reports

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Exhibit II

Empire Plan
Participating Agency Premium Rates
Comparison of 2007 and 2008 Rates

CORE ONLY

Plan Prime

	Gross Rates(1) 2007	Gross Rates(1) 2008	Gross Rates(1) % Change	Net Rates(2) 2007	Net Rates(2) 2008	Net Rates(2) % Change
Individual Optimistic	527.60	571.27	8.3%	491.95	539.44	9.7%
Individual Best Estimate	527.60	587.39	11.3%	491.95	555.56	12.9%
Individual Pessimistic	527.60	603.02	14.3%	491.95	571.19	16.1%
Family Optimistic	1,116.82	1,209.44	8.3%	1,041.38	1,141.80	9.6%
Family Best Estimate	1,116.82	1,243.40	11.3%	1,041.38	1,175.76	12.9%
Family Pessimistic	1,116.82	1,276.33	14.3%	1,041.38	1,208.69	16.1%

Mediprime

	Gross Rates(1) 2007	Gross Rates(1) 2008	Gross Rates(1) % Change	Net Rates(2) 2007	Net Rates(2) 2007	Net Rates(2) % Change
Individual Optimistic	346.35	377.24	8.9%	316.56	348.40	10.1%
Individual Best Estimate	346.35	386.13	11.5%	316.56	357.29	12.9%
Individual Pessimistic	346.35	394.29	13.8%	316.56	365.45	15.4%
Family - 1 medicare Optimistic	935.57	1,015.41	8.5%	866.00	950.76	9.8%
Family - 1 medicare Best Estimate	935.57	1,042.13	11.4%	866.00	977.48	12.9%
Family - 1 medicare Pessimistic	935.57	1,067.59	14.1%	866.00	1,002.94	15.8%
Family - 2 medicares Optimistic	754.33	821.38	8.9%	690.63	759.72	10.0%
Family - 2 medicares Best Estimate	754.33	840.87	11.5%	690.63	779.21	12.8%
Family - 2 medicares Pessimistic	754.33	858.86	13.9%	690.63	797.20	15.4%

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

CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

Plan Prime

	Gross Rates(1) 2007	Gross Rates(1) 2008	Gross Rates(1) % Change	Net Rates(2) 2007	Net Rates(2) 2008	Net Rates(2) % Change
Individual Optimistic	600.69	646.04	7.5%	564.84	614.01	8.7%
Individual Best Estimate	600.69	666.09	10.9%	564.84	631.43	11.8%
Individual Pessimistic	600.69	685.66	14.1%	564.84	653.63	15.7%
Family Optimistic	1,273.96	1,370.12	7.5%	1,198.07	1,302.02	8.7%
Family Best Estimate	1,273.96	1,412.54	10.9%	1,198.07	1,338.71	11.7%
Family Pessimistic	1,273.96	1,453.94	14.1%	1,198.07	1,385.84	15.7%

Mediprime

	Gross Rates(1) 2007	Gross Rates(1) 2008	Gross Rates(1) % Change	Net Rates(2) 2007	Net Rates(2) 2008	Net Rates(2) % Change
Individual Optimistic	363.02	394.32	8.6%	333.18	365.43	9.7%
Individual Best Estimate	363.02	404.12	11.3%	333.18	374.52	12.4%
Individual Pessimistic	363.02	413.17	13.8%	333.18	384.28	15.3%
Family 1 Optimistic	1,036.30	1,118.42	7.9%	966.44	1,053.47	9.0%
Family 1 Best Estimate	1,036.30	1,150.56	11.0%	966.44	1,081.80	11.9%
Family 1 Pessimistic	1,036.30	1,181.45	14.0%	966.44	1,116.50	15.5%
Family 2 Optimistic	798.65	866.71	8.5%	734.81	804.91	9.5%
Family 2 Best Estimate	798.65	888.59	11.3%	734.81	824.91	12.3%
Family 2 Pessimistic	798.65	908.97	13.8%	734.81	847.17	15.3%

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

 

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Exhibit III

EMPIRE PLAN
PA 5 TIER GROUP RATES
1996-2008 Monthly Rates

Core Plus Medical & Psychiatric Enhancements

Individual Planprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
1996 (3)

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	7.0%	7.4%
Most Recent 5 Years	9.0%	8.4%

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%
2008 Projected	888.59	11.3%	824.91	12.3%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.3%	6.0%
Most Recent 5 Years	6.3%	5.5%

(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
1996-2008 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%
2008 Projected	567.87	11.1%	535.57	12.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.3%	8.2%
Most Recent 10 Years	9.6%	10.2%
Most Recent 5 Years	9.7%	9.2%

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%
2008 Projected	1,289.06	11.3%	1,217.77	12.2%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.7%	8.6%
Most Recent 10 Years	9.7%	10.2%
Most Recent 5 Years	9.9%	9.4%

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

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4th Quarter – 2006

Income-Related Medicare Part B Premium Adjustment for 2007 

A new Federal law has changed the amount charged for Medicare Part B coverage for some higher income beneficiaries.  Effective January 1, 2007, some individuals are being charged an income-related adjustment in addition to the standard premium which is $93.50 for 2007.  Based on NYSHIP rules, we previously indicated that if a Medicare primary enrollee or dependent is required to pay more than the standard Medicare Part B premium PAs are not required to reimburse any amount in excess of the standard premium.  However, our determination is being challenged and we have asked our Department Counsel for an opinion.  We will inform you if there is a change in our determination as soon as we receive that opinion.

Timothy’s Law

A new State law known as “Timothy’s Law” was effective January 1, 2007.  It changes the coverage requirements for the diagnosis and treatment of mental, nervous or emotional disorders under most group health plans, including the Empire Plan.  This law essentially requires parity between the coverage provided for mental health conditions and that provided for medical conditions. While the Empire Plan’s Mental Health and Substance Abuse Program for the most part meets or exceeds the requirements of this law, to fully comply the Plan will be required to make some changes in the out-of-network benefits provided for mental health conditions. We are working with the NYS Insurance Department to clarify what changes will be necessary.  Certificate amendments and informational materials will be issued with a retroactive date of January 1, 2007, as soon as possible after the analysis of the requirements is completed. In the meantime, if enrollees have questions about their mental health benefits under Timothy’s Law they should be advised to call ValueOptions, the administrator for the Empire Plan Managed Mental Health and Substance Abuse Program at 1-877-769-7447 and to select Option 3. 

Medicare Part D Employer Subsidy Update

To date, NYSHIP applied for and received estimated Employer Subsidies covering January through November 2006.  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.  Most PAs have executed these agreements; however, there are still a few outstanding agencies; EBD staff has continued to follow up with these agencies.  Please note that your agency must execute and return this agreement to EBD to begin receiving the subsidy credit.   The Employer Subsidy for July and August 2006 was credited to the January 2007 bill; the Subsidy for September 2006 was credited to the February 2007 bill and the Subsidy for October and November 2006 was credited to the March 2007 bill.   

We will continue to distribute 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.

NYSHIP Representation at Municipal Events

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

• The 2007 Annual Conference sponsored by the NYS Government Finance Officers’ Association on March 28–30, 2007,  in Albany, New York.

• The 2007 Local Government Conference sponsored by the NYS Tug Hill Commission on March 29, 2007, in Watertown.

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
Albany, NY 12239
or E-mail: Deborah.Dorazio@cs.state.ny.us

Attachments:

Exhibits I
Exhibits II
Exhibits III
Exhibits IV
NYSHIP News

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