Department of Civil Service

PA07-20

TO: Participating Agency Health Benefit Administrators
FROM: Robert W. DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: September 21, 2007

Enclosed are the Second Quarter Empire Plan Experience Report for 2007 and the cover letter to the Chief Executive Officers.  This report presents the projected 2007 Empire Plan experience and the projected 2008 premium rates.

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September 21, 2007

Dear Chief Executive Officer:

Attached is the Empire Plan Second Quarter Experience Report for 2007.  This report presents the projected 2007 Empire Plan experience based on claims paid through June 30, 2007, and the projected 2008 premium rates.

For the 2007 Plan Year, the Empire Plan carriers project a net dividend of $280.8 million, 5.4% of premium.  This report presents the basis for these projections and future reports will include revisions based on additional claims experience.

The projected 2008 premium rates are presented in Exhibit II and reflect a “best-estimated” net premium increase of 8.5%.  A range of the potential 2008 premium rate increase is included for your budget development considerations.

I hope this report is informative.  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

Second Quarter - 2007

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 2007 Empire Plan Experience
• Projected 2008 Premium Rates

Exhibits

1. Projected 2007 Empire Plan Experience
2. Projected 2008 PA Premium Rates
3. Empire Plan PA 5-Tier Group Rates (1999-2008)
4. Empire Plan PA 2-Tier Group Rates (1999-2008)

• NYSHIP News

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NEW YORK STATE HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
2nd QUARTER REPORT

PROJECTED 2007 EMPIRE PLAN EXPERIENCE

            The Empire Plan carriers project a composite dividend of $280.8 million (5.4% of premium), or $147.7 million more than the margin loaded in the 2007 rates.  The 2007 annual experience projected by the insurance carriers is reported in Exhibit I. 

This projection is based on only six months of 2007 paid claim data.  The following chart presents the percentage of the projected incurred claims actually paid as well as the current 2007 trend as compared to the trend assumed during the 2007 premium rate development:

 

	% of Actual Paid Claims to Projected Incurred Claims		Projected 2007 Trend
	2006	2007	@ Final Renewal	@ 2nd Quarter
Blue Cross Hospital	98.0%	37.2%	12.9%	12.3%
UnitedHealthcare	99.2%	38.4%	12.6%	11.0%
GHI	98.8%	34.2%	4.0%	7.1%
Blue Cross Rx	99.8%	45.8%	12.0%	9.6%

The 2007 projected dividend/(loss) for each carrier as compared to the margin level used in the 2007 premium development is as follows:

	Margin	2007 Projected Dividend/(Loss)	Increase/(Decrease)
Blue Cross Hospital	$34,710,000	$63,609,000	$28,899,000
UnitedHealthcare	$49,267,000	$104,343,000	$55,076,000
GHI	$2,573,000	(3,737,000)	($6,310,000)
Blue Cross Rx	$46,622,000	$116,622,000	$70,000,000
Total	$133,172,000	$280,837,000	$147,665,000

            The increase in the dividend projection is primarily attributable to the decrease in the 2006 claims base projected during the development of the 2007 rates for the prescription drug, hospital and medical programs coupled with an increase in the projected pharma revenue and decrease in 2007 projected trend for the prescription drug program.  For GHI, the decrease in their projected 2007 dividend is primarily attributable to the projected increase in claim costs associated with compliance to Timothy’s Law, which became effective on January 1, 2007.  This increase in projected claim costs is reflected in the increase in the projected 2007 trend.

2008 PROJECTED PREMIUM RATES

Exhibit II presents the projected 2008 Empire Plan gross and net premium rates assuming the application of $332.00million in dividend to all payors.  In aggregate, the Empire Plan gross premium is projected to increase approximately 8.9% while the net premium is projected to increase approximately 8.5%.

A range of the projected gross and net premium rate increase is also included (5.7% - 11.3%).  Carrier rate projections made at this time of the year have been historically conservative with the rates ultimately approved and implemented being less than the projections contained in the 2nd Quarter Reports.  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 5-tier Empire Plan billing rate history in effect since January 1, 1999.  Exhibit IV presents, for illustrative purposes only, the 2-tier rate history from 1999 to 2008.

 

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Exhibit I

2007 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)	1,608,454	1,575,260	242,455	220,681	2,038,396	74,037	10,603	9,139	93,779	1,477,559	5,218,188
(B) Incurred Claims (2)	1,438,543	1,384,297	197,769	192,930	1,774,996	64,286	9,907	6,754	80,947	1,289,338	4,583,824
(C) Administrative Expense (3)	106,302	131,057	14,248	13,752	159,057	13,091	1,893	1,585	16,569	71,599	353,527
(D) Gain/(Loss) (A-B-C)	63,609	59,906	30,438	13,999	104,343	(3,340)	(1,197)	800	(3,737)	116,622	280,837

(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 Annual Statements

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Exhibit II

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

CORE ONLY

Plan Prime

	Gross Rates (1) 2007	Gross Rates (1) 2008 (3)	Gross Rates (1) % Change	Net Rates (2) 2007	Net Rates (2) 2008(3)	Net Rates (2) % Change
Individual Optimistic	527.60	562.46	6.6%	491.95	525.06	6.7%
Individual Best Estimate	527.60	575.95	9.2%	491.95	538.55	9.5%
Individual Pessimistic	527.60	589.31	11.7%	491.95	551.91	12.2%
Family Optimistic	1,116.82	1,191.29	6.7%	1,041.38	1,112.17	6.8%
Family Best Estimate	1,116.82	1,219.73	9.2%	1,041.38	1,140.61	9.5%
Family Pessimistic	1,116.82	1,247.94	11.7%	1,041.38	1,168.82	12.2%

MediPrime

	Gross Rates (1) 2007	Gross Rates (1) 2008 (3)	Gross Rates (1) % Change	Net Rates (2) 2007	Net Rates (2) 2008 (3)	Net Rates (2) % Change
Individual Optimistic	346.35	365.70	5.6%	316.56	330.39	4.4%
Individual Best Estimate	346.35	370.05	6.8%	316.56	334.74	5.7%
Individual Pessimistic	346.35	374.36	8.1%	316.56	339.05	7.1%
Family - 1 Optimistic	935.57	994.53	6.3%	866.00	917.51	5.9%
Family - 1 Best Estimate	935.57	1,013.84	8.4%	866.00	936.82	8.2%
Family - 1 Pessimistic	935.57	1,032.99	10.4%	866.00	955.97	10.4%
Family - 2 Optimistic	754.33	797.76	5.8%	690.63	722.82	4.7%
Family - 2 Best Estimate	754.33	807.95	7.1%	690.63	733.01	6.1%
Family - 2 Pessimistic	754.33	818.05	8.4%	690.63	743.11	7.6%

(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 (3)	Gross Rates (1) % Change	Net Rates (2) 2007	Net Rates (2) 2008 (3)	Net Rates (2) % Change
Individual Optimistic	600.69	638.25	6.3%	564.84	600.52	6.3%
Individual Best Estimate	600.69	655.73	9.2%	564.84	615.54	9.0%
Individual Pessimistic	600.69	673.08	12.1%	564.84	635.35	12.5%
Family Optimistic	1,273.96	1,354.17	6.3%	1,198.07	1,274.32	6.4%
Family Best Estimate	1,273.96	1,391.19	9.2%	1,198.07	1,305.97	9.0%
Family Pessimistic	1,273.96	1,427.98	12.1%	1,198.07	1,348.13	12.5%

MediPrime

	Gross Rates (1) 2007	Gross Rates (1) 2008 (3)	Gross Rates (1) % Change	Net Rates (2) 2007	Net Rates (2) 2008 (3)	Net Rates (2) % Change
Individual Optimistic	363.02	383.03	5.5%	333.18	347.64	4.3%
Individual Best Estimate	363.02	388.29	7.0%	333.18	352.24	5.7%
Individual Pessimistic	363.02	393.52	8.4%	333.18	358.13	7.5%
Family 1 Optimistic	1,036.30	1,098.95	6.0%	966.44	1,021.46	5.7%
Family 1 Best Estimate	1,036.30	1,123.76	8.4%	966.44	1,042.71	7.9%
Family 1 Pessimistic	1,036.30	1,148.40	10.8%	966.44	1,070.91	10.8%
Family 2 Optimistic	798.65	843.71	5.6%	734.81	768.54	4.6%
Family 2 Best Estimate	798.65	856.32	7.2%	734.81	779.39	6.1%
Family 2 Pessimistic	798.65	868.83	8.8%	734.81	793.66	8.0%

(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
1999-2008 Monthly Rates

Core Plus Medical & Psychiatric Enhancements

Individual Planprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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%
2008 Projected	655.73	9.2%	615.54	9.0%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	9.0%	9.4%
Most Recent 10 Years	9.4%	9.6%
Most Recent 5 Years	10.4%	9.9%

Family Planprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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%
2008 Projected	1,391.19	9.2%	1,305.97	9.0%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.5%	8.8%
Most Recent 10 Years	9.7%	10.0%
Most Recent 5 Years	10.6%	10.0%

Individual Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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%
2008 Projected	388.29	7.0%	352.24	5.7%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.3%	5.7%
Most Recent 10 Years	8.9%	9.1%
Most Recent 5 Years	4.9%	3.6%

(1) Represents premium paid to the carriers.
(2) Represents cost to a participating agency.

Family - 1 Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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%
2008 Projected	1,123.76	8.4%	1042.71	7.9%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.8%	7.1%
Most Recent 10 Years	9.6%	9.9%
Most Recent 5 Years	8.5%	7.6%

Family - 2 or More Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	856.32	7.2%	779.39	6.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.2%	5.5%
Most Recent 10 Years	9.4%	9.8%
Most Recent 5 Years	5.5%	4.2%

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

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Exhibit IV

EMPIRE PLAN
PA 2 TIER GROUP RATES
1999-2008 Monthly Rates
(For Illustrative Purposes Only)

Core Plus Medical & Psychiatric Enhancement

Individual

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	553.90	8.3%	516.85	8.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.2%	8.1%
Most Recent 10 Years	9.3%	9.8%
Most Recent 5 Years	9.2%	8.4%

Family

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	1,262.72	9.0%	1,181.86	8.9%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.6%	8.5%
Most Recent 10 Years	9.4%	9.8%
Most Recent 5 Years	9.4%	8.7%

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

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Second Quarter – 2007

IMPORTANT UPDATE:
Income-Related Medicare Part B Premium Adjustment for 2007

As previously reported, 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.  Our original interpretation was that NYSHIP employers would not be required to reimburse any amount in excess of the standard premium.  However, in light of subsequent litigation regarding reimbursement of Medicare Part B premiums, we requested that our Department Counsel review that interpretation.  Based upon that review, we have been advised that Civil Service Law, Section 167-a, requires NYSHIP employers to reimburse the entire Medicare Part B premium charged to a NYSHIP enrollee.  The language of this statute and its implementing regulation, Section 73.3(b)(6) of the Codes, Rules and Regulations of the State of New York (Book 4), provides that an amount “equal to” the monthly premium charge for Medicare be reimbursed to the enrollee.  

The State will be reimbursing the additional Medicare B premium on an annual basis after the end of the calendar year. Affected enrollees will be required to apply for reimbursement by providing documentation of the amount they actually paid for the Medicare Part B premium for the prior year.  EBD is currently developing procedures for this reimbursement and will inform PA HBAs as soon as they are completed.     

Empire Plan Prescription Drug Program Contract Award

The Department’s current contract for the Empire Plan Prescription Drug Program expires on December 31, 2007.  An RFP was issued for that contract and as a result of the procurement process, the Department recently announced the selection of UnitedHealthcare in partnership with Medco.  We successfully negotiated terms of a new four year contract with UnitedHealthcare which we anticipate will reduce plan costs by more than $100 million.  The contract is currently being reviewed by the Office of the State Comptroller and, if approved, will take effect on January 1, 2008.  We are currently working with all parties to ensure a smooth transition for enrollees.

PA Regional Meetings

The announcement of the 2007 PA Regional Meetings was distributed in mid-August.  Please be sure to register as soon as possible using the registration form attached to the announcement.  If you did not receive the announcement, please contact Debbie D’Orazio at her e-mail address - Deborah.Dorazio@cs.state.ny.us or by phone at (518) 485-1771. The meeting dates are:

• Tuesday, October 2nd in Saratoga Springs
• Wednesday, October 3rd in Rockland County
• Thursday, October 4th in Long Island

We look forward to this opportunity to interact with PA representatives and hope you are planning to attend.   

Medicare Part D Employer Subsidy Update

To date, NYSHIP applied for and received estimated Employer Subsidies covering January through November 2006, January through March of 2007 (credited to the July bill) and, most recently, May of 2007, which was applied to the September bill issued in early August.  We are currently testing data for June and July and expect to submit a request to CMS in mid-September.  As indicated in the previous report, the Employer Subsidy for December 2006 has not yet been released pending the completion of the 2006 reconciliation by CMS; by including the December subsidy as a part of the final reconciliation the need to recover any subsidy overpayments will be minimized.   We will continue to distribute subsidy payments as soon as possible following receipt from CMS.

NYSHIP Representation at Municipal Events

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

• The 2007 Annual Fall Training Schoolsponsored by the NYS Conference of Mayors on September 17-20, 2007, in Saratoga Springs, NY.
• The 2007 Annual Fall Seminar sponsored by the NYS Association of Counties on September 19–20, 2007, in Albany.
• The 2007 Annual Convention sponsored by the NYS School Boards’ Association on October 25–27, 2007, in NYC.

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

GASB 45 Census Reports

As indicated in previous reports, NYSHIP will provide agency census reports upon request for use in complying with the provisions of GASB 45.   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.   For additional information about GASB 45, please refer to PA Memos 06-11 and 06-18.

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
NYS Department of Civil Service
Employee Benefits Division
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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