Department of Civil Service

PA10-02
PAEX10-02

TO: Participating Agency Health Benefit Administrators
FROM: Robert W. DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: January 29, 2010

Enclosed is the Third Quarter Empire Plan Experience Report for 2009
and the cover letter to the Chief Executive Officers. This report presents the projected 2009 Empire Plan experience and the approved 2010 premium rates.

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January 29, 2010

Dear Chief Executive Officer:

Attached is the Empire Plan Third Quarter Experience Report for 2009. This report presents the projected 2009 Empire Plan experience, based on claims paid through September 30, 2009, and the approved 2010 premium rates.

The Empire Plan carriers project a 2009 net dividend of $83.8 million, 1.5% of premium. This report presents the basis for these projections and future reports will include revised projections based on additional claims experience.

The approved 2010 premium rates are presented in Exhibit II and reflect a net premium increase of 3.36% for The Empire Plan and a net premium increase of 3.8% for The Excelsior Plan. Given the fiscal challenges currently faced by the State and its localities, our goal was to develop 2010 NYSHIP rates that are as low as possible to address the need for immediate rate relief for all payors. To accomplish this goal, we aggressively negotiated premium reductions with the insurers which included the use of retrospective premium agreements and applied $410 million in dividend as credit to the premium rates. Given these low net rate increases for 2010, which follows the historically low rate increase of 1.2% for 2009, we expect that the 2011 rate increases will track more closely with actual Plan trend. It is too early to accurately predict the 2011 premium rate change with any degree of certainty. As more data becomes available we will provide projections in subsequent reports.

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

THIRD QUARTER 2009

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 2009 Empire Plan Experience
• Approved 2010 Premium Rates

Exhibits

I. Projected 2009 Empire Plan Experience

II. Projected 2010 PA Premium Rates

III. Empire Plan PA 5-Tier Group Rates (2001-2010)

IV. Empire Plan PA 2-Tier Group Rates (2001-2010)

• NYSHIP News

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PROJECTED 2009 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project that the 2009 premiums, which included no margin, will generate a composite dividend of $83.8 million (1.5% of premium). The 2009 annual experience projected by the insurance carriers is reported in Exhibit I.

This projection is based on only nine months of 2009 paid claim data. The following chart presents the percentage of the projected incurred claims actually paid and the current 2009 trend as compared to the trend assumed during the 2009 premium rate development:

	% of Paid Claims to Projected Incurred Claims		Projected 2009 Trend
	2008	2009	@ Final Renewal	@ 3rd Quarter
Blue Cross Hospital	99.4%	63.2%	11.5%	11.3%
UHC Medical	99.8%	65.9%	7.5%	7.9%
MHSA	98.3%	58.2%	9.2%	13.5%
UHC Rx	99.9%	69.9%	9.0%	6.6%

The 2009 projected dividend for each carrier as compared to the margin level used in the 2009 premium development is as follows:

	Margin	2009 Projected Dividend/(Loss)	Increase/(Decrease) over margin
Blue Cross Hospital	$0	$35,935,000	$35,935,000
UHC Medical	$0	($2,746,000)	($2,746,000)
UHC MHSA	$0	($8,564,000)	($8,564,000)
UHC Rx	$0	$59,162,000	$59,162,000
Total	$0	$83,787,000	$83,787,000

The increase in the dividend projection is primarily attributable to the decrease in the 2008 claims base for the hospital program projected during the development of the 2009 rates and a $33 million improvement in the 2009 prescription drug trend.  In addition, an increase in the pharma revenue is projected to be offset by an increase in retention and assessments among all the carriers.  The latter is primarily due to increases in projected assessments (NYS Insurance Department Assessment, Bad Debt and Charity Surcharge and Covered Lives Assessment) made through legislation.  The projected loss for the Mental Health and Substance Abuse Program is primarily the result of a continued shift in services to higher cost non-participating providers as observed since the implementation of Timothy’s Law in 2007.     

Historically, experience projections made by the insurance carriers in the 3rd Quarter Experience Report have been conservative compared to the actual experience.

2010 APPROVED PREMIUM RATES

Through aggressive premium negotiations with the Empire Plan carriers and the application of $410 million in dividend to all payors, The Empire Plan gross premium increased 5.5% while the net premium increased 3.36%.  For the Excelsior Plan, the gross premium increased 6.0% while the net premium increased 3.8%. Exhibit II presents the approved 2010 Empire Plan and Excelsior Plan premium rates.

The low rates of increase provide for the necessary fiscal relief to NYSHIP Participating Agencies in 2010.  While it is too early to accurately predict the 2011 premium rate change with any degree of certainty, we expect the 2011 increase to track more closely with actual Plan trend.

Consistent with the development of the 2009 premium rates, the 2010 premium rates exclude any margin in the rate development.  In exchange, carriers agreed to a retrospective premium arrangement of approximately $253.3 million.  If claims and expenses exceed the premium paid, an additional premium amount will be paid equal to either the amount of the claims and expenses in excess of the premium paid or $253.3 million, whichever is lower.  At this time, we do not expect any retrospective premium payment for 2010 will be necessary.   

Exhibit III presents The Empire Plan individual and family 5-tier billing rate history since 2001.  Exhibit IV presents, for illustrative purposes only, the 2-tier rate history from 2001 to 2010.

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Exhibit I

2009 PROJECTED EMPIRE PLAN EXPERIENCE
In (000's)

	BLUE CROSS HOSPITAL	UNITED HEALTHCARE MEDICAL Core	UNITED HEALTHCARE MEDICAL NY Enhancement	UNITED HEALTHCARE MEDICAL PA Enhancement	UNITED HEALTHCARE MEDICAL Combined	UHC MHSA Core	UHC MHSA NY Enhancement	UHC MHSA PA Enhancement	UHC MHSA Combined	UHC DRUG	TOTAL
(A) Premium (1)	1,888,484	1,680,523	239,434	228,257	2,148,214	111,797	4,795	4,059	120,651	1,486,021	5,643,370
(B) Incurred Claims (2)	1,717,876	1,517,502	214,758	210,124	1,942,384	103,806	3,646	3,305	110,757	1,344,243	5,115,260
(C) Administrative Expense (3)	134,673	171,470	18,780	18,326	208,576	17,103	734	621	18,458	82,616	444,323
(D) Gain/(Loss) (A-B-C)	35,935	(8,449)	5,896	(193)	(2,746)	(9,112)	415	133	(8,564)	59,162	83,787

(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: Carriers 2009 3rd Quarter Experience Reports

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Exhibit II

Empire Plan
Participating Agency Premium Rates
Comparison of 2009 and 2010 Rates
Mediprime Rate Structure

EMPIRE PLAN

PLAN OPTION	GROSS RATES (1) 2009	GROSS RATES (1) 2010	GROSS RATES (1) % Change	NET RATES (2) 2009	NET RATES (2) 2010	NET RATES (2) % Change
Planprime: Individual	630.73	660.24	4.3%	598.58	612.34	2.3%
Planprime: Family	1,350.26	1,431.43	6.0%	1,282.17	1,330.93	3.8%
Medprime: Individual	384.38	400.76	4.3%	359.22	367.37	2.3%
Medprime: Family - 1 medicare	1,103.90	1,171.95	6.2%	1,042.81	1,085.94	4.1%
Medprime: Family - 2 medicares	857.54	912.48	6.4%	803.45	840.98	4.7%

EXCELSIOR PLAN

PLAN OPTION	GROSS RATES (1) 2009	GROSS RATES (1) 2010	GROSS RATES (1) % Change	NET RATES (2) 2009	NET RATES (2) 2010	NET RATES (2) % Change
Planprime: Individual	557.49	583.66	4.7%	529.17	541.71	2.4%
Planprime: Family	1,197.21	1,271.13	6.2%	1,137.16	1,183.09	4.0%
Medprime: Individual	320.35	338.64	5.7%	296.43	307.18	3.6%
Medprime: Family - 1 medicare	960.08	1,026.09	6.9%	904.43	948.54	4.9%
Medprime: Family - 2 medicares	722.95	781.06	8.0%	671.71	713.99	6.3%

(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
2001-2010 Monthly Rates

Individual Planprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	630.73	-0.5%	598.58	1.0%
2010	660.24	4.7%	612.34	2.3%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	7.8%	8.1%
Most Recent 10 Years	8.5%	8.0%
Most Recent 5 Years	6.2%	5.1%

Family Planprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
2001	673.67	10.9%	651.09	10.3%
2002	742.98	10.3%	723.97	11.2%
2003	842.38	10.4%	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	1,350.26	0.3%	1,282.17	1.9%
2010	1,431.43	6.0%	1,330.93	3.8%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	7.5%	7.7%
Most Recent 10 Years	9.0%	8.5%
Most Recent 5 Years	6.7%	5.6%

Individual Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	384.38	-3.2%	359.22	-0.3%
2010	400.76	4.3%	367.37	2.3%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	4.9%	5.2%
Most Recent 10 Years	6.5%	5.7%
Most Recent 5 Years	3.4%	2.1%

Family - 1 Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	1,103.90	-0.5%	1,042.81	1.6%
2010	1,171.95	6.2%	1,085.94	4.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.2%	6.4%
Most Recent 10 Years	8.3%	7.8%
Most Recent 5 Years	5.7%	4.6%

Family - 2 or More Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	873.21	9.3%	794.94	8.2%
2009	857.54	-1.8%	803.45	1.1%
2010	912.48	6.4%	840.98	4.7%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	4.9%	5.3%
Most Recent 10 Years	7.4%	6.7%
Most Recent 5 Years	4.4%	3.2%

(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
2001-2010 Monthly Rates
(For Illustrative Purposes Only)

Individual

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	536.84	5.0%	498.88	4.4%
2009	527.09	-1.8%	497.91	-0.2%
2010	557.46	5.8%	515.75	3.6%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	7.6%	7.4%
Most Recent 10 Years	8.0%	7.4%
Most Recent 5 Years	5.2%	4.1%

Family

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	1,233.38	6.5%	1,150.41	6.0%
2009	1,230.02	-0.3%	1,165.24	1.3%
2010	1,297.06	5.5%	1,203.56	3.3%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.1%	7.9%
Most Recent 10 Years	8.5%	8.0%
Most Recent 5 Years	6.1%	5.0%

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

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Third Quarter – 2009

Dependent Eligibility Audit Update – Many PA Dependents May Lose NYSHIP Eligibility

Acceptable proof of eligibility has not been provided for over 20,000 dependents of Participating Agency enrollees as required by the NYSHIP Dependent Eligibility Verification Project. These dependents will lose eligibility for NYSHIP benefits on a retroactive basis if documentation is not provided soon. The Dependent Eligibility Verification Period which began on August 28th ended on November 25, 2009. This was the period during which enrollees were required to submit documentation of each dependent’s eligibility for coverage under NYSHIP.

In December, enrollees who failed to provide acceptable documentation by the due date received a notice from Budco, the firm administering the audit, advising them that unverified dependent will be removed from the enrollment file with an effective date of February 1, 2009 and enrollees will be responsible for claim payments made on behalf of ineligible dependents back to that date. They also were advised that they had a 30 day appeals period in which to provide proof of eligibility.

Please note the following key dates:

• Week of 1/11/10 – Each PA HBA was sent an agency-specific list of dependents not yet determined to be eligible to give HBAs an opportunity to reach out to enrollees covering those dependents.
• 1/15/10 – Budco’s review of proofs of eligibility ends.
• 1/19/10 – DCS will review documentation received through 3/12/10.
• Week of 2/8/10 – Each PA HBA will receive the final list of non-eligible dependents with the bill for March premium.
• 2/25/10 – All dependents of non-responders and dependents with incomplete documentation will be removed from eligibility on a retroactive basis effective February 1, 2009.
• 3/12/10 – The Dependent Eligibility Verification Project will end. After this date agency HBAs will be responsible for obtaining acceptable proof of eligibility and reinstating dependents for whom proof is provided. HBAs will receive a memo detailing reinstatement procedures prior to this date.

We encourage HBAs to reach out to enrollees with dependents for whom eligibility has not been documented, so that eligible dependents do not experience problems with accessing NYSHIP benefits and HBAs do not have the added workload of reinstating eligible dependents after the project is completed.

Medicare Part B Premium for 2010

For most Medicare beneficiaries, the standard monthly Medicare Part B premium for 2010 remains the same as it was in 2009 - $96.40. This is the result of a Federal hold harmless provision that prohibits an increase in the Medicare Part B premium in years when there is no cost of living adjustment in Social Security benefits. However, this provision does not apply to everyone. Individuals who are new to Medicare in 2010 or who did not receive Social Security benefits in 2009 will pay a standard monthly
Medicare Part B premium of $110.50 in 2010. Also, anyone subject to the Income Related Medicare Adjustment Amount (IRMAA) will have a premium increase for 2010. Civil Service Law requires NYSHIP Participating Agencies to reimburse enrollees the full cost of Medicare Part B coverage for both the enrollee and any dependents eligible for Medicare primary coverage. Please review your agency Medicare Part B premium reimbursement procedures to ensure that you are in compliance.

Extension of the ARRA COBRA Premium Reduction

The American Recovery and Reinvestment Act of 2009 (ARRA) was amended on December 19, 2009 by the Department of Defense Appropriations Act of 2010. As a result, the qualification period for and the duration of the Federal subsidy of COBRA premium under the ARRA were extended by three months and six months respectively. The original ARRA legislation provides for premium reductions for health benefits under COBRA through a Federal subsidy. Eligible individuals pay only 35 percent of their COBRA premiums. Employers must pay the 65% premium subsidy in the first instance, and then may withhold payroll tax payments to the U.S. Treasury to recover the premium advance. To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee's employment.

Under the extension, the involuntary termination must occur during the period that began September 1, 2008 and ends on February 28, 2010 (formerly December 31, 2009). The premium reduction is now available for up to 15 months (formerly 9 months). Also, the amendment eliminates the requirement that COBRA eligibility occurs during the qualification period. For detailed information, including updated COBRA ARRA model notices refer to http://www.dol.gov/ebsa/COBRA.html.

Each NYSHIP Participating Agency is responsible for its own COBRA administration. Agencies with fewer than 20 employees should refer to memo PA09-11/PAEX 09-7.

Legislation Regarding Health Benefits for Volunteer Firefighters and EMTs

Legislation was passed in 2008 to allow emergency services volunteers to participate in public employee health insurance plans. The new law does not currently apply to NYSHIP since it did not amend Civil Service Law with regard to the eligibility of volunteers. In 2009 legislation was introduced to extend the change to NYSHIP. That bill was recently returned to the Assembly and currently sits in committee in both houses. The Fireman's Association of the State of New York (FASNY) keeps a handy scorecard on relevant legislation. The status of this particular bill can be checked at their website: http://www.fasny.com/legislation_issues-scorecard.aspx.

Pre-Tax Contribution Program (PTCP) and Domestic Partners

The Department has become aware of a clarification of the IRS rules regarding PTCP and premium paid for domestic partner coverage. As a result, effective January 1, 2010, State enrollees who are eligible for the PTCP and who cover a domestic partner will be able to have their full premium contribution for the cost of family health insurance coverage deducted from their employee wages before taxes are withheld. Formerly, State employees’ extra cost for domestic partner coverage could not be paid with pre-tax dollars. Participating Agencies should consult with their legal and/or tax advisors regarding the treatment of premiums for domestic partners.

GASB 45

The 2009 Buck Consultants report “Development of Recommended Actuarial Assumptions for New York State/SUNY GASB Valuation – Participating Agency Version” is available online at: http://www.cs.state.ny.us/gasb_pa/2008_NYS_GASB_45_Participating_Agencies.pdf.
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: Kevin.Hill@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.

Prompt Payment of NYSHIP Premium

As indicated in previous reports, the Employee Benefits Division has been aggressively monitoring agencies that fail to submit premium payments in a timely manner. This procedure includes suspension of claims for enrollees of any agency that falls three months behind in their premiums. To avoid disruption of your employees’ benefits, please be sure to submit your premium payments by the due date, as we must submit premium to the Empire Plan insurers on time. You may wish to consider submitting your payments electronically to promote timely payments. Attached are guidelines to initiate electronic transfer of funds.

Transmission of Reports Electronically

Many Participating Agencies have requested to receive the Empire Plan Experience Reports via e-mail. Beginning with this report, we are now offering all agencies the opportunity to have an easy access electronically through the following direct link to our website: http://www.cs.state.ny.us/ebd/ebdonlinecenter/pamarket/qer.cfm

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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