Department of Civil Service

PA94-08

TO: Participating Agency Health Benefits Administrators
FROM: Robert DuBois, Director, Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report (April - June 1994)
DATE: August 17, 1994

Attached is the Empire Plan Quarterly Experience Report for the period April - June 1994. The Plan continues to reflect favorable experience and the carriers project a dividend for the year which represents 6.8 percent of premium. The projected 1995 premium rates are provided in Exhibit III of the Report. The "best estimate" Empire Plan net rates for the Core Plus Medical and Psychiatric Enhancement option has improved since the first quarter report; the expected rate increases are approximately 1.4 percent for both individual and family coverage.

There are several matters that I wish to call to your attention. First, we are implementing a new procedure to mail Empire Plan materials directly to your enrollees, including active employees and retirees. The direct mailing will eliminate the need for your staff to distribute the materials and will result in a savings to the Plan. Also, it will assure the timely distribution of important benefit information to your enrollees.

Second, representatives from this Division and from the Empire Plan carriers participate throughout the year as exhibitors at conferences and annual meetings of state associations. Following is a schedule of upcoming meetings where we will have a New York State Health Insurance Program exhibit. If you will be in attendance at one of these meetings, I invite you to stop by the exhibit and discuss any aspect of the Plan with our representatives.

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
APRIL-JUNE 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

Virginia M. Apuzzo

President New York State Civil Service Commission

A look inside ...

Empire Plan 1994 Experience

Projected 1995 Premium Rates

Keeping You Informed

NYSHIP General Information Books/Empire Plan Certificates

Direct Mailing to Participating Agency Enrollees

Exhibits

I 1994 Empire Plan Experience through 6/30/94

II 1994 Projected Annual Empire Plan Experience

III Projected 1995 Empire Plan Rates

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

EMPIRE PLAN 1994 EXPERIENCE

Empire Plan experience through the second quarter of 1994 and the 1994 annual experience projected by the insurance carriers are presented in Exhibits I and II, respectively. The Empire Plan carriers project a composite 1994 dividend of $111.8 million or 6.8 percent of premium based on claims paid through June 1994. This represents an increase of $60.9 million over the margin loaded in the 1994 rates.

Blue Cross

Blue Cross projects a 1994 dividend of $63.9 million or 10.3 percent of premium. This represents a $45 million increase over the margin loaded in the 1994 rates and is the result of the following factors:

As presented, the majority of the dividend is attributable to the reduction in the 1993 claim base from what was projected at the time the 1994 rates were developed (10/93). This compounds and impacts the 1994 claim base and trend.

Metropolitan Medical

Metropolitan projects a composite 1994 dividend of $25.1 million or 3.8 percent of premium. This projected dividend represents a $5.3 million increase over the margin loaded in the 1994 rates and is attributable to the following factors:

Metropolitan Mental Health and Substance Abuse Program

Metropolitan projects a 1994 surplus of $23.4 million or 17.6 percent of premium for the Mental Health and Substance Abuse (MHSA) Program. This represents an increase of $19.7 million over the margin loaded in the 1994 rates and is attributable to the following changes in the rate renewal assumptions:

Cigna

Cigna projects a 1994 deficit of $600,000 or .3 percent of premium. Though this represents an improvement over the first quarter projected deficit of $7.4 million, claims and processing costs were higher than the $8.5 million margin load. The annual projection should be treated cautiously as the new program contains only six months of experience.

Detailed analysis of the first quarter report submitted by Cigna and Value Rx, revealed that the deficit projected in that report was overstated as the management programs were not fully implemented. As such, increased management savings may materialize in the second half of 1994 thereby reducing the amount of the projected 1994 claims.

PROJECTED 1995 PREMIUM RATES

Exhibit III presents the projected 1995 Empire Plan gross and net rates in comparison to the 1994 rates. The projected 1995 net rates reflect application of $181 million in dividends to all payors. Although NYSHIP gross premiums are expected to increase approximately 5.5 percent in 1995, the "best estimate" Empire Plan net rates for the Core Plus Medical and Psychiatric Enhancement option are expected to increase approximately 1.4 percent 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.

The underlying trend assumptions used by the carriers for the "Best Estimated 1995 Participating Agency Rates" are as follows:

Given that such projections were made with only six months of 1994 paid claims 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 IV presents the individual and family rate history for the Core plus Medical and Psychiatric Enhancements option.

KEEPING YOU INFORMED

NYSHIP General Information Books/Empire Plan Certificates

The Employee Benefits Division is preparing a compendium that consolidates the 1990 NYSHIP General Information Book, 1986 Empire Plan certificates, a new Value Behavioral Health certificate, and all published amendments and Empire Plan Reports since 1986.

The compendium will replace the entire package of documents now distributed to enrollees. Group-specific versions are planned for publication in late 1994 and early 1995. The version for Participating Agencies with Core Plus Medical and Psychiatric Enhancements will be one of the first versions off the presses.

Direct Mailing to Participating Agency Enrollees

Beginning with the next Empire Plan mailing, we will mail directly to Participating Agency enrollees. We will send materials by first class mail to the home address on the Central Enrollment file for all employees, retirees and others enrolled in NYSHIP. Mailing by first class mail directly to enrollees' and retirees' homes will represent $10,000 savings to the Plan in postage on each issue, and agencies will save the time and cost involved in remailing material to enrollees. Also, direct mailing assures that enrollees will receive information about benefit changes in a timely manner.

Prior to the initial direct mailing, we will send to you a listing of the addresses currently on file for your agency's enrollees. The listing may be used to verify addresses. It may also be used if an enrollee does not receive the initial mailing to determine if the enrollee's current address differs from the address of record on file. In that instance, a transaction should be submitted to change the file.

Exhibit I

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

(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 theperiod reported by the insurance company(accrual basis).
(3) Administrative Expenses - Allcharges bythe insurance carrier other than for the payment of claims.
Includescarrier's cost to administerthe program, interest charges,and retention.

Source: 1994 2nd Quarter Reports

Exhibit II

1994 PROJECTED EMPIRE PLAN EXPERIENCE
In (000's)

(1) Earned Premium - Premium which pays for coverage for the period reported (accrual basis).
(2) IncurredClaims - Represents the cost of covered services provided during the period reported by the insurance company (accrual basis).
(3) Administrative Expenses - All chargesby the insurancecarrier other than for the payment ofclaims.
Includes carrier's cost to administer the program, interest charges, and retention.

Source: 1994 2nd QuarterReport

Exhibit III

EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 1994 and Projected 1995 Rates

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