Department of Civil Service

PA94-06

TO: Participating Agency Chief Executive Officers
FROM: Robert DuBois, Director, Employee Benefits Division
SUBJECT: Empire Plan 1993 Annual Experience Report Empire Plan Quarterly Experience Report (January - March, 1994)
DATE: May 26, 1994

Attached are the final 1993 Empire Plan experience report and the first quarter 1994 Empire Plan experience report.

For the sixth consecutive year, the Plan is in a surplus position at the end of the year. The net surplus for 1993 is 158.7 million or 10% of premium. We believe this continuing favorable experience is attributable to the cost containment measures and managed care enhancements which have been incorporated into the Plan in the past several years.

The preliminary experience through the first quarter of 1994 continues to be favorable, and the carriers project a dividend for the year which represents 5% of premium. Included in the report are the projected 1995 premium rates. Keep in mind that the experience and projections are based on limited 1994 data, and the projections may change as more data become available.

I am pleased to inform you that we are planning to change the method of mailing materials to Participating Agencies. As you know, we currently ship materials in bulk to agency Health Benefits Administrators (HBAs) for distribution to enrolled employees and retirees. Soon, we will mail directly to your employees and retirees and send a back-up supply to your HBA. Enrollees will receive materials more quickly and agencies will save time and money. The Plan will also realize cost savings since direct mailings are less costly than bulk shipments. In addition, program administration will be strengthened, since our computerized mailing list serves as proof that an individual was issued plan materials. Within the next few weeks, we will give your HBA details about the change and the projected schedule. As I am sure you realize, for us to mail directly we need accurate addresses for your employees and retirees. In the near future, we will be contacting HBAs to request their help in updating addresses. Your support in this effort will make the process go smoothly.

If you have any suggestions on how we can better meet your needs in providing health care to your employees, please contact me.

EMPIRE PLAN EXPERIENCE REPORT
JANUARY - MARCH 1994
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
EMPIRE PLAN 1993 EXPERIENCE

As presented in Exhibit I, the Empire Plan carriers declared a composite 1993 dividend of $158.7 or 10.0% of premium. This represents an increase of $126.9 million over the margin loaded in the 1993 rates.

Blue Cross

Blue Cross declared a 1993 dividend of $69.5 million or 11.8% of premium. This represents a $66.6 million increase over the margin loaded in the 1993 rates. The increase in the dividend is due to a $18.4 million reduction in the 1992 reserve level in addition to a $47.4 million reduction to the 1993 claim base. The 1993 claim base was affected by both a reduction in the underlying trend from 10.4% projected at the 1993 rate renewal to approximately 6.1% and the application of audit recoveries. Administrative expenses are also $800,000 lower than originally projected.

Metropolitan Medical

Metropolitan declared a composite 1993 dividend of $59.6 million or 9.1% of premium. This represents a $36.5 million increase over the margin loaded in the 1993 rates. The increase in the dividend is primarily attributable to a reduction in claims from what was projected at the time of rate development. The claim reduction was spurred on by the implementation of a computerized coding fragmentation program which produced savings of approximately $9.3 million.

Metropolitan Mental Health and Substance Abuse Program

Metropolitan declared a 1993 surplus of $3.6 million or 3.1% of premium for the Mental Health and Substance Abuse (MHSA) Program. When combined with the 1992 loss carryforward of $1.4 million, a dividend of $2.2 million was declared.

The implementation of the Managed MHSA Program has resulted in plan savings in excess of $60 million over a two year period. The going forward trend is projected at 5.6% as opposed to the 11 % trend level observed prior to the implementation of the new program. The improvement in the experience over prior projections has been achieved by the following actions of Metropolitan and Value Behavioral Health:

Redirecting care from inpatient to outpatient settings when clinically appropriate.

Renegotiating more favorable provider facility rates.

Introducing clinical on-site audits of patient records at selected inpatient facilities.

These actions have yielded Plan savings while enhancing out-of-pocket costs to enrollees.

Cigna

Cigna declared a 1993 surplus of $26.0 million or 11.8% of premium, a $19.9 million increase over the margin loaded in the 1993 rates. When combined with the 1992 loss carryforward of $2.0 million, a dividend of $24.0 million was declared. The increase in the projected dividend is due to the following factors:

Trend Reduction: $12.7 million

Understated 1992 Claim Base: (.4)

Increased Administrative Expense: (.1)

COB Processing: 1.5

Demographics: 6.2

Total: $19.9 million

PROJECTED EMPIRE PLAN 1994 EXPERIENCE

Empire Plan experience through the first quarter of 1994 and the 1994 annual experience projected by the insurance carriers are presented in Exhibits II and Ill, respectively. The Empire Plan carriers project a composite 1994 dividend of $81.8 million or 5.0% of premium based on claims paid through March 1994. This represents an increase of $31.0 million over the margin loaded in the 1994 rates.

Blue Cross

Blue Cross projects a 1994 dividend of $38.0 million or 6.2% of premium. This represents a $19.1 million increase over the margin loaded in the 1994 rates. The increase in the projected dividend is due to a $2.0 million reduction in the 1993 reserve level in addition to an estimated $17.1 million reduction to the 1994 claim base. The 1994 claim base was affected by both a reduction in the underlying trend from 10.4% projected at the 1994 rate renewal to the current projected trend of approximately 8.7% as well as the reduction to the 1993 claim base projected at the time the 1994 rates were developed.

Metropolitan Medical

Metropolitan projects a composite 1994 dividend of $34.4 million or 5.3% of premium. This represents a $18.0 million increase over the net margin loaded in the 1994 rates. The increase in the projected dividend is primarily attributable to a reduction in the 1994 claims base from what was projected at the time of rate development. This reduction has been offset by an $11.0 million Par Provider Fee increase effective 7/1/94.

Metropolitan Mental Health and Substance Abuse Program

Metropolitan projects a 1994 surplus of $16.7 million or 12.6% of premium for the Mental Health and Substance Abuse (MHSA) Program, an increase of $13.0 million over the margin loaded in the 1994 rates. The causes of the additional surplus are:

Deficit Recovery Premium Load not needed: $3.8 million

Reduction in Retention: .5

Reduction in 1994 Claim Base: 8.7

Total: $13.0 million

Cigna

Cigna projects a 1994 deficit of $7.4 million or 3.3% of premium, a $15.8 million decrease over the margin loaded in the 1994 rates. While on the surface this would indicate that drug utilization has increased significantly over the level projected at rate development, the current annual projection is considered premature and unsubstantiated for the following reasons:

On 1/1/94 a new vendor began administration of the prescription drug program. The implementation of the management programs designed to yield savings which were included in the premium will require some time before savings are actually realized.

The estimate made by Cigna excludes any projected management savings.

Cigna and ValueRx will meet shortly to reconcile the current projection with the assumptions used in the rate development.

These projections are based on only two months claims payments.

Consequently, the projection made by Cigna should be treated cautiously. Civil Service will review the discussions of Cigna and ValueRx regarding the reconciliation of the current projection with the margin load and assure that such discrepancies are fully analyzed by the 2nd Quarter Report.

PROJECTED 1995 PREMIUM RATES

Exhibit IV presents the projected 1995 Empire Plan gross and net rates in comparison to the 1994 rates. The 1995 net rates reflect application of $181 million in dividends to all payors. Although NYSHIP gross premiums are expected to increase approximately 9.7% in 1995, the "best estimate" Empire Plan net rates for the Core Plus Medical and Psychiatric Enhancement option are expected to increase approximately 5.9% for both individual and family coverage. The lower net rate increase in comparison to the gross rate increase is attributable to an increased level of dividend application in 1995.

Given that the carriers' projections were made with only three months of 1994 paid claim data, each Participating Agency must determine its own level of conservatism when using the projected 1995 rates. Updated projections will be provided in subsequent quarterly reports.

EMPIRE PLAN RATE HISTORY

Exhibit V presents the Individual and Family rate history for the Core plus Medical and Psychiatric Enhancements option.

KEEPING YOU INFORMED

Which Employers Must Provide FMLA Benefits? Probably you; maybe

The Family and Medical Leave Act of 1993 (FMLA), defines an "employer" to include a "public agency", as defined in section 3(x) of the Fair Labors Standards Act (FLSA). The interim regulations of the U.S. Department of Labor (DOL) implementing the FMLA define a "public agency", in accordance with the FLSA, to include the government of a political subdivision of a state or any agency of a political subdivision of a state. The regulations provide that, while the 50- employee coverage test for purposes of determining whether an employer is covered does not apply to public agencies, for an employee to be eligible and entitled to FMLA leave, the public agency must employ 50 employees within a 75- mile area around the worksite.

Generally, a political subdivision, such as a county, city or town, will constitute a single employer for purposes of determining employee eligibility. The interim regulations provide that where there is any question about whether a public entity is a public agency, as distinguished from a part of another public agency, the U.S. Bureau of Census' "Census of Governments" will be determinative. If a public entity is not listed therein, the criteria used by the Bureau of the Census, including existence as an organized entity, governmental character, and substantial autonomy of the entity, will be used to determine whether an entity is a public agency.

Therefore, although a small employer may be a separate participating agency in the New York State Health Insurance Program, it may be part of a larger public employer for purposes of determining employee eligibility for benefits under the FMLA. Confused? You are not alone. Many small employers may find it difficult to determine whether they are required to provide benefits under the FMLA. Since the law became effective August 5, 1993 for most employers, those employers who have not already done so should waste no time in obtaining an opinion from their legal counsel to clarify their responsibilities under the FMLA.

Exhibit I

1993 EMPIRE PLAN EXPERIENCE
In (000's)

	BLUE CROSS	METROPOLITAN MEDICAL Core	METROPOLITAN MEDICAL NY Enhancement	METROPOLITAN MEDICAL PA Enhancement	METROPOLITAN MEDICAL Combined	METROPOLITAN MEDICAL Core	METROPOLITAN MHSA NY Enhancement	METROPOLITAN MHSA PA Enhancement	METROPOLITAN MHSA Combined	CIGNA	TOTAL
Premium (1)	588,298	471,783	82,935	99,708	654,426	94,065	17,611	6,319	117,995	219,974	1,580,693
Incurred Claims (2)	485,571	381,091	72,002	71,610	524,703	66,812	15,785	13,055	95,652	186,090	1,292,016
Admin. Expenses (3)	33,285	51,762	8,973	9,388	70,123	14,683	2,820	1,209	18,712	7,857	129,977
Gain/ Loss (A-B-C)	69,442	38,930	1,960	18,710	59,600	12,570	(994)	(7,945)	3,631	26,027	158,700

(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 retention.

Source: 1993 Experience Statements

Exhibit II

EMPIRE PLAN EXPERIENCE
Through First Quarter 1994
In (000's)

	BLUE CROSS	METROPOLITAN MEDICAL Core	METROPOLITAN MEDICAL NY Enhancement	METROPOLITAN MEDICAL PA Enhancement	METROPOLITAN MEDICAL Combined	METROPOLITAN MEDICAL Core	METROPOLITAN MHSA NY Enhancement	METROPOLITAN MHSA PA Enhancement	METROPOLITAN MHSA Combined	CIGNA	TOTAL
Premium (1)	153,868	118,347	22,197	21,883	162,427	24,114	4,893	3,882	32,889	55,488	404,672
Incurred Claims (2)	130,592	95,658	16,466	16,506	128,630	16,398	3,352	2,690	22,440	48,389	330,051
Admin. Expenses (3)	8,588	14,020	2,325	2,319	18,664	3,614	722	571	4,907	2,762	34,921
Gain/ Loss (A-B-C)	14,688	8,669	3,406	18,710	15,133	4,102	819	621	5,542	4,337	39,700

(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 retention.

Source: 1994 1st Quarter Reports

Exhibit III

1994 PROJECTED EMPIRE PLAN EXPERIENCE
In (000's)

	BLUE CROSS	METROPOLITAN MEDICAL					METROPOLITAN MHSA			CIGNA	TOTAL
		Core	NY Enhancement	PA Enhancement	Combined	Core	NY Enhancement	PA Enhancement	Combined
Premium (1)	615,011	476,100	89,600	87,600	653,300	97,000	19,800	15,500	132,300	222,908	1,623,519
Incurred Claims (2)	542,350	400,300	72,950	73,250	546,500	63,600	18,100	14,800	96,500	219,206	1,404,556
Admin. Expenses (3)	34,630	53,794	9,279	9,291	72,364	13,749	2,981	2,338	19,068	11,052	137,114
Gain/ Loss (A-B-C)	38,031	22,006	7,371	5,059	34,436	19,651	(1,281)	(1,638)	16,732	(7,350)	81,849

(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 retention.

Source: 1994 1st Quarter Reports

Exhibit IV

EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 1994 and 1995 (projected) Rates
CORE ONLY

Individual (81)

EMPIRE PLAN OPTION	GROSS RATES (1) 1994	GROSS RATES (1) 1995	GROSS RATES (1) % Change	NET RATES (2) 1994	NET RATES (2) 1995	NET RATES (2) % Change
Optimistic	182.20	189.78	4.2%	166.03	168.37	1.4%
Best Estimate	182.20	196.45	7.8%	166.03	175.04	5.4%
Pessimistic	182.20	204.65	12.3%	166.03	183.24	10.4%

Family (82)

EMPIRE PLAN OPTION	GROSS RATES (1) 1994	GROSS RATES (1) 1995	GROSS RATES (1) % Change	NET RATES (2) 1994	NET RATES (2) 1995	NET RATES (2) % Change
Optimistic	409.09	424.58	3.8%	372.35	376.99	1.2%
Best Estimate	409.09	439.93	7.5%	372.35	392.34	5.4%
Pessimistic	409.09	458.57	12.1%	372.35	410.98	10.4%

Individual (51)

EMPIRE PLAN OPTION	GROSS RATES (1) 1994	GROSS RATES (1) 1995	GROSS RATES (1) % Change	NET RATES (2) 1994	NET RATES (2) 1995	NET RATES (2) % Change
Optimistic	185.57	196.43	5.9%	169.20	175.02	3.4%
Best Estimate	185.57	203.45	9.6%	169.20	182.04	7.6%
Pessimistic	185.57	212.00	14.2%	169.20	190.59	12.6%

Family (52)

EMPIRE PLAN OPTION	GROSS RATES (1) 1994	GROSS RATES (1) 1995	GROSS RATES (1) % Change	NET RATES (2) 1994	NET RATES (2) 1995	NET RATES (2) % Change
Optimistic	421.33	444.76	5.6%	383.74	397.20	3.5%
Best Estimate	421.33	461.17	9.5%	383.74	413.61	7.8%
Pessimistic	421.33	480.87	14.1%	383.74	433.31	12.9%

Family (52)

EMPIRE PLAN OPTION	GROSS RATES (1) 1994	GROSS RATES (1) 1995	GROSS RATES (1) % Change	NET RATES (2) 1994	NET RATES (2) 1995	NET RATES (2) % Change
Optimistic	421.33	444.76	5.6%	383.74	397.20	3.5%
Best Estimate	421.33	461.17	9.5%	383.74	413.61	7.8%
Pessimistic	421.33	480.87	14.1%	383.74	433.31	12.9%

CORE PLUS MEDICAL ENHANCEMENT

Individual (61)

EMPIRE PLAN OPTION	GROSS RATES (1) 1994	GROSS RATES (1) 1995	GROSS RATES (1) % Change	NET RATES (2) 1994	NET RATES (2) 1995	NET RATES (2) % Change
Optimistic	210.46	219.55	4.3%	194.22	193.74	-0.2%
Best Estimate	210.46	227.79	8.2%	194.22	201.98	4.0%
Pessimistic	210.46	237.56	12.9%	194.22	211.75	9.0%

Family (62)

EMPIRE PLAN OPTION	GROSS RATES (1) 1994	GROSS RATES (1) 1995	GROSS RATES (1) % Change	NET RATES (2) 1994	NET RATES (2) 1995	NET RATES (2) % Change
Optimistic	472.45	491.10	3.9%	435.55	433.31	-0.5%
Best Estimate	472.45	509.95	7.9%	435.55	452.16	3.8%
Pessimistic	472.45	532.09	12.6%	435.55	474.30	8.9%

CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

Individual (71)

EMPIRE PLAN OPTION	GROSS RATES (1) 1994	GROSS RATES (1) 1995	GROSS RATES (1) % Change	NET RATES (2) 1994	NET RATES (2) 1995	NET RATES (2) % Change
Optimistic	213.83	226.20	5.8%	197.39	200.39	1.5%
Best Estimate	213.83	234.79	9.8%	197.39	208.98	5.9%
Pessimistic	213.83	244.91	14.5%	197.39	219.10	11.0%

Family (72)

EMPIRE PLAN OPTION	GROSS RATES (1) 1994	GROSS RATES (1) 1995	GROSS RATES (1) % Change	NET RATES (2) 1994	NET RATES (2) 1995	NET RATES (2) % Change
Optimistic	484.69	511.28	5.8%	446.94	453.52	1.5%
Best Estimate	484.69	531.19	9.6%	446.94	473.43	5.9%
Pessimistic	484.69	554.39	14.4%	446.94	496.63	11.1%

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

Exhibit V

EMPIRE PLAN
PA GROUP RATES
1985-1995 Monthly Rates
Core plus Med. & Psych. Enh.

Individual

Year	Gross Rate	% Change	Average Increase From 1985	Net Rate	% Change	Average Increase From 1985
1985*	95.71			92.85	453.52
1986	91.97	-3.9		91.49	-1.5%
1987	103.14	12.1%		101.65	11.1%
1988 (1)	142.01	37.7%		141.52	39.2%
1989	168.72	18.8%		168.05	18.7%
1990 (2)	179.50	6.4%		167.09	-0.6%
1991 (3)	202.09	12.6%		185.09	10.8%
1992	198.85	-1.6%		181.81	-1.8%
1993	214.30	7.8%		194.64	7.1%
1994	213.83	-0.2%		197.39	1.4%
1995 (projected)	234.79	9.8%	9.9%	208.98	5.9%	9.0%

Family

Year	Gross Rate	% Change	Average Increase From 1985	Net Rate	% Change	Average Increase From 1985
1985*	203.97			197.57
1986	195.31	-4.2%		194.30	-1.7%
1987	222.39	13.9%		219.20	12.8%
1988 (1)	324.13	45.7%		323.06	47.4%
1989	383.42	18.3%		381.95	18.2%
1990 (2)	403.75	5.3%		380.15	-0.5%
1991 (3)	464.39	15.0%		417.36	9.8%
1992	445.64	-4.0%		407.76	-2.3%
1993	479.37	7.6%		426.35	4.6%
1994	484.69	1.1%		446.94	4.8%
1995 (projected)	531.19	9.6%	10.8%	473.43	5.9%	9.9%

*Statewide Plan Premium Rates

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