Department of Civil Service

PA93-17

TO: Participating Agency Chief Executive Officers
FROM: Robert DuBois, Director, Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report (July - September 1993)
DATE: November 22, 1993

Attached is the Empire Plan Quarterly Experience Report for the period July - September, 1993. The Plan continues to reflect favorable experience through the third quarter of 1993 and the carriers project a dividend for the year which represents 7.8 percent of premium.

I call your attention to Exhibit III of the report. The premium rates shown are the approved 1994 premium rates. We are pleased that the approved rates are below the Optimistic rates projected in the Empire Plan Quarterly Report for April - June 1993 for all Empire Plan options. The favorable rates are attributable primarily to two factors: (1) the carriers are projecting a higher dividend than was projected in the second quarter and (2) the 1994 premium for the new prescription drug program is lower than was anticipated in June.

Earlierthis year, I informed you that the prescription drug component of the Empire Plan was out for bid. After a rigorous review process, CIGNAA/alueRx was selected to administer the program effective January 1, 1994. We have sent to your Health Benefits Administrator a supply of Empire Plan Reports which describe the new program for distribution to each of your enrollees. The change in the program administrator will have little, if any, impact on your enrollees since the benefits do not change and enrollees will continue to receive benefits by using their current employee benefit cards at participating pharmacies.

If you have comments or suggestions about any aspect of the Plan, please feel free to contact me.

EMPIRE PLAN EXPERIENCE REPORT

JULY-SEPTEMBER 1993

produced for

PARTICIPATING AGENCIES IN THE

NEW YORK STATE

HEALTH INSURANCE PROGRAM

by

the Employee Benefits Division

New York State Department of Civil Service

Josephine L. Gambino

President New York State Civil Service Commission

A look inside ...

Empire Plan 1993 Experience

1994 Premium Rates

Exhibits

I Empire Plan Experience (Through Third Quarter 1993)

II Empire Plan Experience (Projected 1993 Contract Year)

III Empire Plan 1994 Premium Rates (approved)

IV Empire Plan PA Group Rates (1985 -1994 Monthly Rates)

EMPIRE PLAN 1993 EXPERIENCE

Empire Plan experience through the third quarter of 1993 and the 1993 annual experience projected by the insurance carriers are presented in Exhibits I and II, respectively. The composite 1993 Empire Plan dividend is projected at $123.3 million or 7.8 percent of premium. This represents an increase of $91.5 million over the margin loaded in the 1993 rates.

Blue Cross

Blue Cross is projecting a 1993 dividend of $57.1 million or 9.7 percent of premium. This is $54.2 million more than the margin loaded in the 1993 rates. The dividend increase is due primarily to an overstatement of the 1992 claims base and a reduction in the 1993 trend from 10.4 to 6.4 percent. At the time of the 1993 rate development (October 1992), the 1992 trend was estimated at 9.5 percent; the current estimate based on claims paid through June 1993 is 6.1 percent. This reduction in the 1992 trend corresponds to a $13 million reduction in the 1992 claims base.

Metropolitan Medical

Metropolitan projects a composite 1993 dividend of $46.3 million or 7.1 percent of premium. This is $23.2 million more than the margin loaded in the 1993 rates. The increase in the projected dividend is attributable to a reduction in the 1992 claim base from what was projected at the time of rate development, a modest reduction in trend, and improved utilization review. The amounts attributable to each are:

Metropolitan Mental Health and Substance Abuse Program

Metropolitan/APM project a 1993 deficit of $2.4 million or 2 percent of premium for the Mental Health and Substance Abuse Program. When combined with the 1992 loss of $1.4 million, the deficit balance projected on 12/31/93 is $3.8 million. Such loss, which is primarily attributable to higherthan projected utilization, is expected to be recovered by Metropolitan through subsequent years margin. Please remember that even with these deficits, the APM Managed MH/SA Program has yielded significant savings compared to what plan premiums would have been under the predecessor benefit. Substantial reductions in premiums were taken in prior years and the current deficit amounts represent only a small fraction of those prior year savings.

Cigna

Cigna projects a 1993 dividend of $22.3 million or 10.2 percent of premium, a $16.2 million increase over the margin loaded in the 1993 rates. The increase in the projected dividend is due to the following factors:

PROJECTED 1994 PREMIUM RATES

Exhibit III presents the established 1994 Empire Plan gross and net rates in comparison to the 1993 rates. Exhibit IVpresents the individual and family rate history of the Core plus Medical and Psychiatric Enhancements option. The 1994 net rates reflect the application of $161.1 million in dividend to all payors. Though NYSHIP gross premiums have only increased approximately .8 percent for 1994, the Empire Plan net rates for the Core Plus Medical and Psychiatric Enhancement option are expected to increase 1.4 percent and 4.8 percent for individual and family coverage respectively. The higher net rate increase is mainly attributable to a decreasing level of dividend application.

The 1994 actual rates are significantly lower than originally estimated in the Quarterly Experience Report issued in February 1993. The decrease in the 1994 rates is attributable to lower trend experienced thus far in 1993, resulting in a lower projected 1993 claims base, and a continuation of the lower trend patterns into 1994. Trend assumptions for 1994 have varied as follows:

Exhibit I

EMPIRE PLAN EXPERIENCE
Through Third Quarter 1993
In (000's)

(1) Earned Premium - Premium which pays for coverage for the periodreported (accrual basis).
(2) Incurred Claims- Represents the cost of coveredservicesprovided during the period reported by the insurancecompany (accrual basis).
(3) Administrative Expenses- All charges by the insurance carrier otherthan forthe paymentof claims.
Includes carrier's cost to administerthe program, interest charges, and retention.

Source: 1993 3rd QuarterReports

Exhibit II

EMPIRE PLAN EXPERIENCE
PROJECTED 1993 Year
In (000's)

(1) Earned Premium - Premium which pays for coverage for the period reported (accrual basis).
(2) Incurred Claims - Represents the cost ofcovered 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 ofclaims.
Includes carrier's cost toadminister the program, interest charges, and retention.

Source: 1993 3ndQuarter Reports

Exhibit III

EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 1993 and 1994 Rates

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

Exhibit IV

EMPIRE PLAN
PA GROUP RATES
1985-1995 Monthly Rates

Core plus Med & Psych. Enh.

Individual

Family

* Statewide Plan Premium Rates

(1) 1988 rates represent the effective amounts of the 1/88 and 8/88 rate changes.
(2) No change in effective net rate over 1989.
(3) Represents rates effective 1/1/91 - 6/30/91