Department of Civil Service

PA95-14

TO: Participating Agency Health Benefits Administrators
FROM: The Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: November 30, 1995

The Third Quarter Empire Plan Experience Report and the cover letter to Chief Executive Officers are enclosed.

This Report provides projected 1995 experience and actual 1996 rates in the new MediPrime Rate structure.

November 30, 1995

Dear Chief Executive Officer:

I am pleased to present you with the Participating Agency Third Quarter Report for 1995. This report provides projected 1995 Empire Plan Experience and actual 1996 rates.

For the third time in the past five rate years, the aggregate net Participating Agency rates have gone down. In 1996, the overall rates for the Core Plus Medical and Psychiatric Enhancement will be 0.7% and 2.7% lower than 1995 for Individual and Family coverage, respectively. However, the actual cost to a given agency will depend on its mix of Individual and Family coverage as well as the ratio of Plan to Medicare primary enrollees and dependents. Plan primary Individual and Family coverage rates will increase 7.3% and 4.3%, respectively. The MediPrime Individual rate will be 31.1% lower than the Individual coverage rate charged in 1995 and the MediPrime Family rates will be 13% and 30.3% lower than the Family rate charged in 1995.

You will notice that the report presents the rates in both the current "two tier" structure (Exhibits II and IV), for comparison with 1995 rates, and the new "five tier" structure (Exhibit III), which is the new MediPrime rate structure. We will continue the two tier format for the historical comparison (Exhibit IV). However, in future reports, we will use only the MediPrime structure for any other rate exhibits.

Please note also that the Exhibits to this report do not include information on the Core plus Psychiatric Enhancement. This Enhancement is no longer being offered because no agency has chosen this option currently and none have for quite some time.

As always, if you have questions or comments on the report, please feel free to contact me.

Sincerely,

Robert W. DuBois, CEBS
Director
Employee Benefits Division

EMPIRE PLAN EXPERIENCE REPORT
JANUARY - SEPTEMBER 1995
produced for
PARTICIPATING AGENCIES IN THE
NEW YORK STATE
HEALTH INSURANCE PROGRAM

by

the Employee Benefits Division
New York State Department of Civil Service
George C. Sinnott, President
New York State Civil Service Commission
NYS HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
3rd QUARTER REPORT
PROJECTED 1995 EMPIRE PLAN EXPERIENCE

Empire Plan 1995 annual experience projected by the insurance carriers is reported in Exhibit I. Based on claims paid through September, the Empire Plan carriers project a composite 1995 surplus of $59.4 million or 3.5% of premium. This is $15.2 million over the margin loaded in the 1995 rates.

Please note that the Exhibit presenting the Empire Plan year-to-date experience has been deleted from the report. We believe that projecting the experience of each carrier through the end of the year is more relevant and, consequently, we will only present that information (Exhibit I) in future reports.

Blue Cross

Blue Cross projects a 1995 dividend of $25.7 million or 4.2% of premium. This is $13.7 million over the margin loaded in the 1995 rates. It is primarily due to a decrease in the 1994 claim base and improved claims runout, offset somewhat by an increase in the projected 1995 rate renewal trend from 6.2% to approximately 8.3%.

Metropolitan Medical

Metropolitan projects a composite 1995 dividend of $23.4 million or 3.4% of premium, a $3.5 million increase from the margin loaded in the 1995 rates. The increase in the projected dividend is attributable to an improvement in the secular 1995 trend partially offset by an increase in the 1994 claim base used to project 1995 rates. The latest projection also includes savings resulting from implementing the Managed Physical Medicine Program effective September 1, 1995, for state employees and retirees.

Metropolitan Mental Health and Substance Abuse Program

Metropolitan projects a 1995 surplus of $10.1 million or 9.0% of premium for the Mental Health and Substance Abuse (MHSA) Program. This is an increase of $5.2 million over the margin loaded in the 1995 rates. The increase is the result of a $5.4 million reduction in the 1994 claim base and a modest decrease in the 1995 trend.

Cigna

A 1995 surplus of $261,000 or 0.1% of premium is estimated by Cigna. This reflects a $7.0 million decrease over the margin loaded in the 1995 rates. It is largely attributable to an increase in projected claims as well as a reduction in the projected interest credits earned in the dedicated cash account. Including the 1994 carryforward loss, a $2.7 million contract loss position is projected at December 31, 1995.

1996 PREMIUM RATES

Exhibit II (Two Tier) presents the 1996 Empire Plan gross and net rates in comparison to the 1995 rates. The 1996 net rates reflect the application of $197.8 million in dividends to all payors. Although Empire Plan gross premiums are projected to increase approximately 1.0% in 1996, the Two Tier net rates for the Core Plus Medical and Psychiatric Enhancement option decreased 0.7% and 2.7% for Individual and Family coverage, respectively. The net rate decrease in comparison to the gross rate increase is the result of an increased level of dividend application in 1996.

Exhibit Ill presents the 1996 MediPrime Rates (Five Tier) in comparison to the 1995 Empire Plan Rates. These rates, which will be implemented January 1, 1996, reflect the relative cost differences between Plan primary contracts and MediPrime contracts. The net rate increase (Core plus Medical and Psychiatric Enhancement) for Plan primary enrollees will range from 4.3% to 7.3% while the range of the net rate decrease for MediPrime contracts is minus 13.0% to minus 31.9%. The actual cost impact resulting from the change in rate years and the implementation of MediPrime rates will vary by agency and will depend on the mix of Individual and Family coverage as well as the number of Medicare eligibles in the agency.

The underlying trend assumptions used by the carriers for the 1996 Participating Agency Rates are as follows:

This trend factor reflects the upturn in trend which has been predicted by many experts in the health care field.

Exhibit IV presents the Individual and Family rate history for the Core Plus Medical and Psychiatric Enhancements option.

KEEPING YOU INFORMED

MediPrime status has been established for over 49,000 Participating Agency enrollments. On November 3, 1995, the Central Enrollment File was updated to reflect MediPrime Status. Under separate cover, you have received or will be receiving shortly, a reconciliation listing. This listing will show each person for whom MediPrime status has been established and for whom MediPrime rates will be charged. The listing will also show any under sixty five (USF) Medicare enrollees or dependents for whom Medicare primacy could not be established.

It is important that you verify that the individuals listed are, in fact, Medicare primary because no hospital or medical claims will be paid on behalf of a MediPrime enrollee or dependent when there is a conflict between the claim information and the MediPrime status until the status is corrected.

There will be a new transaction code (MED) which you will use to report Medicare eligibility to the Central Enrollment File. Instructions on how to use this transaction, how to reconcile the listing with your records, and how to maintain Medicare enrollments in the future are included in the memo which accompanies the Reconciliation Listing.

Exhibit I

1995 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: 1995 Third Quarter Report

Exhibit II

EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 1995 and Projected 1996 Rates
FOR COMPARISON PURPOSES ONLY

(1) Represents premiums charged by the carriers.
(2) Represents cost to a participating agency.
NOTE: The CORE PLUS PSYCHIATRIC ENHANCEMENT is no longer being offered and, therefore, has been removed form the Exhibit.

Exhibit III

MediPrime
Participating Agency Premium Rates
Comparison of 1995 and 1996 Rates

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

Exhibit IV

EMPIRE PLAN
PA GROUP RATES
1985-1996 Monthly Rates

*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.
(4) Represents 2 tier Empire Plan Rates.