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The Empire Plan is a unique health insurance plan designed especially for public employees in New York State. Empire Plan benefits include inpatient and outpatient hospital coverage, medical/surgical coverage, Centers of Excellence for transplants, infertility and cancer, home care services, equipment and supplies, mental health and substance abuse coverage and prescription drug coverage.

State Seal
DAVID A. PATERSON
GOVERNOR
STATE OF NEW YORK
DEPARTMENT OF CIVIL SERVICE
ALBANY, NEW YORK 12239
www.cs.ny.gov
NANCY G. GROENWEGEN
COMMISSIONER

PA08-10

TO: Participating Agency Health Benefit Administrators
FROM: Robert W. DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: July 31, 2008

Enclosed are the First Quarter Empire Plan Experience Report for 2008 and the cover letter to the Chief Executive Officers. This report presents the projected 2007 Empire Plan experience and projected 2008 Empire Plan experience and the projected 2009 premium rates.


July 31, 2008

Dear Chief Executive Officer:

Attached is the Empire Plan First Quarter Experience Report for 2008. This report presents the actual 2007 Empire Plan experience, the projected 2008 Empire Plan experience, based on claims paid through March 31, 2008, and the projected 2009 premium rates.

For the 2007 Plan Year, the Empire Plan carriers declared a 2007 net dividend of $450.0 million, 8.6% of premium. This dividend will be used to offset future premium increases. For the 2008 Plan Year, the Empire Plan carriers project a net dividend of $244.3 million, 4.4% of premium. This report presents the basis for these projections and future reports will include revisions based on additional claims experience.

The projected 2009 premium rates are presented in Exhibit III and reflect a “best estimated” net rate increase of 8.1%. The range of the potential 2009 premium rate increase is included for your budget development considerations.

In addition, the New York State Health Insurance Program will begin offering the Excelsior Plan, a lower cost version of the Empire Plan, effective July 1, 2008. Currently, the lower cost option is known as The Empire Plan Core Only. The benefit design for agencies currently in the Core Only Option will change to the Excelsior Plan benefits effective January 1, 2009. These agencies have been notified of the changes. The Excelsior rates are included within the exhibits of this report.

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


EMPIRE PLAN EXPERIENCE REPORT

FIRST QUARTER
(January - March 2008)

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

Exhibits

  1. 2007 Empire Plan Experience
  2. Projected 2008 Empire Plan Experience
  3. Projected 2009 PA Premium Rates
  4. Empire Plan PA 5-Tier Group Rates (2000-2009)
  5. Empire Plan PA 2-Tier Group Rates (2000-2009)

NEW YORK STATE HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
1st QUARTER REPORT

ACTUAL 2007 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers declared a composite dividend of $450.0 million (8.6% of premium), or $316.9 million more than the margin loaded in the 2007 rates. The 2007 annual experience is reported in Exhibit I. An additional, $3.5 million in dividend was declared by Cigna which represents favorable 2007 activity pertaining to the prescription drug contract that terminated, effective 12/31/05. The experience under this contract will continue to be updated until we have accounted for all activity related to claims and pharma revenue incurred/earned by the Program

This 2007 settlement is based on thirteen months of 2007 paid claims data. The following chart presents the percentage of the incurred claims actually paid as well as the observed 2007 trend as compared to the trend assumed during the 2007 rate development:

% of Actual Paid Claims to Projected Incurred Claims Projected 2007 Trend
2006
2007
@ Renewal
@ 4th Quarter
Blue Cross 99.4% 93.1% 12.9% 10.6%
UnitedHealthcare 99.9% 94.4% 12.6% 5.9%
GHI 99.8% 92.3% 4.0% 8.6%
Blue Cross Rx 100.0% 98.1% 12.0% 6.5%

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

Margin
2007 Dividend/(Loss)
Increase/(Decrease)
Blue Cross $34,710,000 $110,521 ,000 $75,811,000
UnitedHealthcare $49,267,000 $169,403,000 $120,136,000
GHI $2,573,000 ($5,182,000) ($7,755,000)
Blue Cross Rx $46,622,000 $175,305,000 $128,683,000
Total $133,172,000 $450,047,000 $316,875,000

The large increase in the dividend is primarily attributable to the significant reduction in claim costs from those amounts projected during the development of the 2007 premium rates for the prescription drug, medical and hospital programs. When the 2007 premium rates were developed in October 2006, the amount of the actual 2006 incurred and paid claims through September was approximately 62% of the 2006 projected incurred claim amounts. Approximately 36% of the incremental dividend is attributable to a lower 2006 claim base as compared to the current projected 2006 claim base which is approximately 99.9% complete.

Another 63% of the incremental dividend is attributable to the lower actual 2007 composite trend of 7.3% as compared to the composite projected trend of 12.2% used in the 2007 premium development. The balance of the incremental dividend is attributable to a reduction in the retention charges over the amounts included in the premium development.

The loss incurred under the Mental Health and Substance Abuse Program was primarily due to the passage of Timothy’s Law which occurred a few months after the 2007 rates were developed. This resulted in increased claim costs under the non-network benefit. Under normal circumstances, the loss declared by GHI would be problematic to GHI and the Program. However, the loss is recoverable in its entirety by GHI as the State and GHI agreed to a retrospective premium arrangement. Dividends declared by GHI in 2006 will be used to fund this payment.

PROJECTED 2008 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $244.3 million (4.4% of premium), or $94.2 million more than the margin loaded in the 2008 rates. The 2008 annual experience projected by the insurance carriers is reported in Exhibit II.

This projection is based on only three months of 2008 paid claim data. The following chart presents the percentage of the projected incurred claims actually paid as well as the current 2008 trend as compared to the trend assumed during the 2008 premium rate development:

% of Paid Claims to Projected Incurred Claims Projected 2008 Trend
2007
2008
@ Final Renewal
@ 1st Quarter
Blue Cross Hospital

96.5%

13.9%

12.0%

11.2%

UHC Medical

98.1%

16.0%

10.5%

8.5%

GHI MHSA

97.1%

11.7%

6.0%

4.6%

Rx

98.3%

21.0%

9.7%

9.5%

The 2008 projected dividend for each carrier as compared to the margin level used in the 2008 premium development is as follows:

Margin
2008 Projected Dividend/(Loss)
Increase/(Decrease)
Blue Cross Hospital $38,176,000 $46,075,000 $7,899,000
UHC Medical $54,975,000 $143,905,000 $88,930,000
GHI MHSA $2,035,000 $3,496,000 $1,461,000
UHC Rx $55,516,000 $50,871,000 ($4,645,000)
Total $150,128,000 $244,347,000 $94,219,000

The increase in the dividend projection is primarily attributable to the decrease in the 2007 claims base for the medical and prescription drug components projected during the development of the 2008 rates and an improvement in 2008 trend for the medical and hospital programs. There also is a substantial increase in the projected pharma revenue for the prescription drug program. Offsetting the favorable prescription drug program experience is a significant increase in the disabled lives reserve. The reserve amount projected by UnitedHealthcare is considered to be excessively conservative and will be reviewed.

2009 PROJECTED PREMIUM RATES

Exhibit III presents the projected 2009 Empire Plan gross and net premium rates assuming the application of $350.0 million in dividend to all payors. In aggregate, the Empire Plan gross premium is projected to increase approximately 7.6% while the net premium is projected to increase approximately 8.1%.

A range of the projected gross and net premium rate increase is also included (5.0% - 11.2%). Carrier rate projections made at this time of the year have been historically conservative with the rates ultimately approved and implemented being significantly less than the projections contained in 1st Quarter Reports. Each agency should assess its budgetary environment in using the enclosed projections.

Exhibit III also presents the 2008 (effective July 1, 2008) and projected 2009 rates for the Excelsior Plan. As compared to the Empire Plan rates, the Excelsior Plan rates are in aggregate 15% lower.

Exhibit IV presents the individual and family rate history for the Core plus Medical and Psychiatric Enhancement option based on the 5-tier Empire Plan billing rate history in effect since January 1, 1999. Exhibit V presents, for illustrative purposes only, the 2-tier rate history from 2000 to 2009.


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)
1,609,494
1,578,350
242,785
221,234
2,042,369
74,384
10,676
9,153
94,213
1,480,774
5,226,850
(B) Incurred Claims (2)
1,392,866
1,323,506
196,280
192,199
1,711,985
76,272
3,589
2,795
82,656
1,240,783
4,428,290
(C) Administrative Expense (3)
106,107
131,982
14,735
14,264
160,981
13,497
1,750
1,492
16,739
64,686
348,513
(D) Gain/(Loss) (A-B-C)
110,521
122,862
31,770
14,771
169,403
(15,385)
5,337
4,866
(5,182)
175,305
450,047

(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 2007 Annual Statements
Includes SEHP


Exhibit II

2008 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
BLUE CROSS DRUG
TOTAL
(A) Premium (1)
1,761,888
1,708,282
252,649
241,808
2,202,739
105,387
1,605
983
107,975
1,535,394
5,607,996
(B) Incurred Claims (2)
1,592,725
1,468,337
211,279
198,201
1,877,817
81,658
2,599
2,213
86,470
1,409,026
4,966,038
(C) Administrative Expense (3)
123,088
149,212
16,371
15,434
181,017
17,508
300
201
18,009
75,497
397,611
(D) Gain/(Loss) (A-B-C)
46,075
90,733
24,999
28,173
143,905
6,221
(1,294)
(1,431)
3,496
50,871
244,347

(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 2008 1st Quarter Reports


Exhibit III

Participating Agency Premium Rates
Comparison of 2008 and Projected 2009 Rates

CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

Plan Prime: Individual

Gross Rates (1)
2008

Gross Rates (1)
2009 (3)

Gross Rates (1)
% Change

Net Rates (2)
2008

Net Rates (2)
2009 (3)

Net Rates (2)
% Change

Optimistic

633.79
662.46
4.5%
592.38
619.45
4.6%

Best Estimate

633.79
681.74
7.6%
592.38
638.73
7.8%

Pessimistic

633.79
700.98
10.6%
592.38
657.97
11.1%

Plan Prime: Family

Gross Rates (1)
2008

Gross Rates (1)
2009 (3)

Gross Rates (1)
% Change

Net Rates (2)
2008

Net Rates (2)
2009 (3)

Net Rates (2)
% Change

Optimistic

1,346.27
1,408.45
4.6%
1,258.79
1,317.96
4.7%

Best Estimate

1,346.27
1,449.15
7.6%
1,258.79
1,358.66
7.9%

Pessimistic

1,346.27
1,489.80
10.7%
1,258.79
1,399.31
11.2%

Medprime: Individual

Gross Rates (1)
2008

Gross Rates (1)
2009 (3)

Gross Rates (1)
% Change

Net Rates (2)
2008

Net Rates (2)
2009 (3)

Net Rates (2)
% Change

Optimistic

397.23
416.19
4.8%
360.41
382.84
6.2%

Best Estimate

397.23
424.28
6.8%
360.41
390.93
8.5%

Pessimistic

397.23
432.36
8.8%
360.41
399.01
10.7%

Medprime: Family-1

Gross Rates (1)
2008

Gross Rates (1)
2009 (3)

Gross Rates (1)
% Change

Net Rates (2)
2008

Net Rates (2)
2009 (3)

Net Rates (2)
% Change

Optimistic

1,009.74
1,162.19
4.7%
1,026.86
1,081.36
5.3%

Best Estimate

1,009.74
1,191.68
7.4%
1,026.86
1,110.85
8.2%

Pessimistic

1,009.74
1,221.15
10.0%
1,026.86
1,140.32
11.0%

Medprime: Family-2

Gross Rates (1)
2008

Gross Rates (1)
2009 (3)

Gross Rates (1)
% Change

Net Rates (2)
2008

Net Rates (2)
2009 (3)

Net Rates (2)
% Change

Optimistic

873.21
915.93
4.9%
794.94
844.75
6.3%

Best Estimate

873.21
934.23
7.0%
794.94
863.05
8.6%

Pessimistic

873.21
952.53
9.1%
794.94
881.35
10.9%

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

EXCELSIOR PLAN

Plan Prime: Individual

Gross Rates (1)
2008

Gross Rates (1)
2009 (3)

Gross Rates (1)
% Change

Net Rates (2)
2008

Net Rates (2)
2009 (3)

Net Rates (2)
% Change

Optimistic

551.81
577.12
4.6%
513.43
536.91
4.6%

Best Estimate

551.81
593.56
7.6%
513.43
553.35
7.8%

Pessimistic

551.81
609.95
10.5%
513.43
569.74
11.0%

Planprime: Family

Gross Rates (1)
2008

Gross Rates (1)
2009 (3)

Gross Rates (1)
% Change

Net Rates (2)
2008

Net Rates (2)
2009 (3)

Net Rates (2)
% Change

Optimistic

1,173.06
1,221.59
4.1%
1,091.89
1,137.00
4.1%

Best Estimate

1,173.06
1,256.18
7.1%
1,091.89
1,171.59
7.3%

Pessimistic

1,173.06
1,290.70
10.0%
1,091.89
1,206.11
10.5%

MediPrime: Individual

Gross Rates (1)
2008

Gross Rates (1)
2009 (3)

Gross Rates (1)
% Change

Net Rates (2)
2008

Net Rates (2)
2009 (3)

Net Rates (2)
% Change

Optimistic

322.07
337.24
4.7%
286.19
304.78
6.5%

Best Estimate

322.07
344.03
6.8%
286.19
311.57
8.9%

Pessimistic

322.07
350.80
8.9%
286.19
318.34
11.2%

MediPrime: Family-1

Gross Rates (1)
2008

Gross Rates (1)
2009 (3)

Gross Rates (1)
% Change

Net Rates (2)
2008

Net Rates (2)
2009 (3)

Net Rates (2)
% Change

Optimistic

943.33
981.72
4.1%
864.68
904.86
4.6%

Best Estimate

943.33
1,006.66
6.7%
864.68
929.80
7.5%

Pessimistic

943.33
1,031.54
9.4%
864.68
954.68
10.4%

MediPrime: Family-2

Gross Rates (1)
2008

Gross Rates (1)
2009 (3)

Gross Rates (1)
% Change

Net Rates (2)
2008

Net Rates (2)
2009 (3)

Net Rates (2)
% Change

Optimistic

713.58
741.83
4.0%
637.43
672.71
5.5%

Best Estimate

713.58
757.13
6.1%
637.43
688.01
7.9%

Pessimistic

713.58
772.40
8.2%
637.43
703.28
10.3%

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


Exhibit IV

EMPIRE PLAN
PA 5 TIER GROUP RATES
2000-2009 Monthly Rates

Core Plus Medical & Psychiatric Enhancements

Individual Planprime

Year
Gross Rate (1)
% Change
Net Rate (2)
% Change
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
633.79
5.5%
592.38
4.9%
2009 projected
681.74
7.6%
638.73
7.8%

Average Percent Increase

Gross Rate % Change
Net Rate % Change
From Inception of 5 Tier Structure (1996)
8.6%
9.0%
Most Recent 10 Years
9.4%
9.4%
Most Recent 5 Years
8.8%
7.8%

Family Planprime

Year
Gross Rate (1)
% Change
Net Rate (2)
% Change
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
1,346.27
5.7%
1,258.78
5.1%
2009 projected
1,449.15
7.6%
1,358.66
7.9%

Average Percent Increase

Gross Rate % Change
Net Rate % Change
From Inception of 5 Tier Structure (1996)
8.2%
8.4%
Most Recent 10 Years
9.7%
9.9%
Most Recent 5 Years
8.9%
8.0%

Individual Medprime

Year
Gross Rate (1)
% Change
Net Rate (2)
% Change
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
397.23
9.4%
360.41
8.2%
2009 projected
424.28
6.8%
390.93
8.5%

Average Percent Increase

Gross Rate % Change
Net Rate % Change
From Inception of 5 Tier Structure (1996)
5.6%
6.1%
Most Recent 10 Years
8.7%
8.6%
Most Recent 5 Years
4.5%
3.3%

Family - 1 Medprime

Year
Gross Rate (1)
% Change
Net Rate (2)
% Change
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
1,109.74
7.1%
1,026.86
6.3%
2009 projected
1,191.68
7.4%
1,110.85
8.2%

Average Percent Increase

Gross Rate % Change
Net Rate % Change
From Inception of 5 Tier Structure (1996)
6.8%
7.1%
Most Recent 10 Years
9.5%
9.6%
Most Recent 5 Years
7.3%
6.3%

Family - 2 or More Medprime

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