Department of Civil Service

PA94-16

TO: Participating Agency Chief Executive Officers
FROM: Robert DuBois, Director, Employee Benefits Division
SUBJECT: Empire Plan Quarterly Report (July - September 1994)
DATE: November 22, 1994

Attached is the Empire Plan Quarterly Experience Report for the period July - September, 1994. The Plan continues to reflect favorable experience through the third quarter of 1994 and the carriers project a dividend for the year which represents 8.5% percent of premium.

I call your attention to Exhibit III of the report. The premium rates shown are the approved 1995 premium rates. The decrease in Empire Plan premiums from the 1994 rates translates into savings for the 725 local subdivisions which offer their employees Empire Plan coverage. While the general slowing of growth in health care costs is a major factor in these reductions, more appropriate use of benefits and the favorable impact of benefit management features introduced over the past several years have also contributed.

You may be interested to know that we have received a number of inquiries this year from localities throughout the state about participation in the New York State Health Insurance Program. To date, fourteen additional agencies have elected to participate. We believe that the continued long term stability of the Empire Plan can be enhanced as we broaden our enrollment base. For that reason, we regularly participate in conferences and annual meetings of statewide organizations which provide services to localities, and are available to meet with agency administrators to present our program. If you know of any agency in your area which may be considering an alternative from their present health plan, we would encourage you to put them in touch with us.

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

EMPIRE PLAN EXPERIENCE REPORT
JULY - SEPTEMBER1994
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
EMPIRE PLAN 1994 EXPERIENCE

Empire Plan experience through the third 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 $138.7 million or 8.5% of premium based on claims paid through September 1994. This represents an increase of $87.8 million over the margin loaded in the 1994 rates.

Blue Cross

Blue Cross projects a 1994 dividend of $79.4 million or 12.8% of premium. This represents a $60.5 million increase over the margin loaded in the 1994 rates and is the result of the following factors:

Margin in rates: $18.9 million

Reduction in 1993 Claim Base: 17.2

Reduction in Projected 1994 Trend: 29.3

1993 Claim Runout Improvement: 11.0

Reduction in Retention: 3.0

Total: $79.4 million

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. In addition, the observed 1994 trend is currently projected at 5.1% as opposed to the 10.4% trend factor projected at the time the 1994 rates were developed. The low 1994 trend is partially attributable to a negative case mix adjustment from 1992 and 1993.

Metropolitan Medical

Metropolitan projects a composite 1994 dividend of $31.2 million or 4.8% of premium. This projected dividend represents a $11.4 million increase over the margin loaded in the 1994 rates and is attributable to the following factors:

Margin in rates: $19.8 million

Surplus Carry Forward: (3.8)

Impact of Overstated 1993 Claims Base: 2.0

Reduction in Projected 1994 Trend: 26.7

Par Fee Increase (1/2 Year): (10.0)

Increase in Retention: (8.6)

Additional Utilization Savings: 5.1

Total: $31.2 million

Metropolitan Mental Health and Substance Abuse Program

Metropolitan projects a 1994 surplus of $30.6 million or 23.1% of premium for the Mental Health and Substance Abuse (MHSA) Program. This represents an increase of $26.9 million over the margin loaded in the 1994 rates and is attributable to the following changes in the rate renewal assumptions:

Margin Loaded: $3.7 million

Deficit Recovery Premium Load not needed: 3.8

Decrease in the 1993 claim base: 6.3

Improvements in Case Management Process: 16.1

Reduction in Retention: .7

Total: $30.6 million

This large dividend is mainly attributable to Value Health's efforts in renegotiating inpatient rates in late 1993 as well as the reduction in the average length of stay for inpatient services from 18.3 days to 15.2 days.

Cigna

Cigna projects a 1994 deficit of $2.5 million or 1.1% of premium. A major cause of the difference between incurred and projected experience is the change in the drug utilization mix which is a factor of the physicians dispensing patterns. Though the experience is modestly worse than projected last year, Value Rx reports savings attributable to their management of approximately $29 million. In addition, 1994 earned formulary rebates of approximately $4.5 million will be used to reduce the 1995 premiums.

1995 PREMIUM RATES

Exhibit Ill presents the approved 1995 Empire Plan gross and net rates in comparison to the 1994 rates. The 1995 net rates reflect application of $162.5 million in dividends to all payors. Although Empire Plan gross premiums increased approximately .5% in 1995, the net rates for the Core Plus Medical and Psychiatric Enhancement option decreased an average of 1.6% for individual and family coverage. The net rate decrease 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:

Blue Cross: 6.2%

Metropolitan Medical Core: 4.2%

Metropolitan Medical Enhancement: 5.9%

Metropolitan MHSA Core: 2.0%

Metropolitan MHSA Enhancement: 2.0%

Cigna: 11.0%

Composite: 6.0%

Exhibit IV presents the individual and family rate history for the Core plus Medical and Psychiatric Enhancements option.

KEEPING YOU INFORMED

ENROLLEES RECEIVE DIRECT MAILINGS OF PLAN MATERIALS

In August we began mailing the Empire Plan Report and other Plan documents directly to Participating Agency employees and retirees enrolled in NYSHIP. With each mailing, we send agencies a supply equal to 20 percent of their enrollment to give to new employees. This change offers several advantages, outlined below.

Mailing the Empire Plan Report by first class mail directly to enrollees' and retirees homes will save $10,000 in postage and shipping cost on each issue and eliminate, entirely, agency costs for remailing. It will also save time for agency Health Benefits Administrators. This new procedure speeds delivery, ensuring that enrollees will receive Plan documents before benefit changes.

As we prepared our first mailing list, we sent Participating Agencies a copy of the list of each agency's enrollees and their home addresses as they appear on the Central Enrollment File. We asked agencies to check the addresses and update them on the enrollment file.

This first mailing produced 4,488 returns or three percent with incorrect addresses. We expect this to improve to our normal return rate of under two percent as addresses are corrected. We mailed the returned publications back to the agencies and asked the Health Benefits Administrators to make sure the enrollee receives the material and to correct the enrollee's address if the change had not already been made.

We are pleased to offer this new service to you and your enrollees. If you have any questions about the new procedure, please call the Communications Unit at 518-457-7577.

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 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 3rd 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) 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 3rd Quarter Reports

Exhibit III

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

CORE ONLY

CORE PLUS PSYCHIATRIC ENHANCEMENT

CORE PLUS MEDICAL ENHANCEMENT

CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

(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

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 effect net rate over 1989.
(3) Represents rates effective 1/1/91-6/30/91.