Department of Civil Service

PA96-20

TO: Participating Agency Health Benefits Administrators
FROM: The Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: December 31, 1996

Enclosed are the Third Quarter Empire Plan Experience Report for 1996 and the cover letter to Chief Executive Officers.

This report provides projected 1996 experience and actual premium rates for 1997.

December 31, 1996

Dear Chief Executive Officer:

Attached is the Participating Agency Third Quarter Report for 1996. This report provides projected 1996 EmpIre Plan Experience, based on claims paid through September 1996 and actual 1997 premium rates.

Based on claims paid through September 1996, the carriers project a surplus of approximately $196.8 million or 10.9% of premium. The report includes details for each of the carriers and, as in the past, these projections will be revised in each quarterly report based on actual claims experience for 1996.

The 1997 premium rates for each of the options are included in Exhibit II. The gross and net premiums will increase .8% and 5.3% respectively; the report explains the basis for these rates.

As you may know, the State and Medco Containment Insurance Corporation were unable to reach agreement on a contract for the prescription drug component of the Empire Plan to take effect January 1, 1997; as a result, the Department withdrew its conditional award and proceeded to obtain an extension of the current contract to assure continuation of coverage for enrollees. The State has issued a new Request for Proposal with the new program going into effect on January 1, 1998.

The 1996 Regional Meetings for Participating Agency Chief Executive Officers and Health Benefits Administrators were held in mid-December. The report includes an outline of the material presented.

I hope this report is informative and useful to you. Please don't hesitate to contact me if you have any questions, comments or suggestions.

Sincerely,

Robert W. DuBois, CEBS
Director
Employee Benefits Division

EMPIRE PLAN EXPERIENCE REPORT
JULY - SEPTEMBER 1996
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 1996 EMPIRE PLAN EXPERIENCE

Based on claims paid through September 1996, the Empire Plan carriers project a composite surplus of $196.8 million or 10.9% of premium. This represents an increase of $142.3 million over the margin loaded in the 1997 rates. The 1996 annual experience projected by the insurance carriers is reported in Exhibit I. Individual carrier projections are explained as follows:

Blue Cross

Blue Cross projects a 1996 dividend of $103.5 million or 16.1% of the premium. This represents an $84.3 million increase over the margin loaded in the 1996 rates and is primarily due to a $42.4 million decrease in the 1995 claim base from what was estimated at the time the 1996 rates were developed. This improvement was caused in large part by Blue Cross's failure to properly assess the impact of electronic claim submissions. The additional $43.1 million of projected dividend is due to the reduction of projected 1996 trend from 7.6% to negative .1%, while retention is expected to be $1.2 million greater than the amount loaded in the rates.

MetraHealth Medical

Metra Health projects a composite 1996 dividend of $39.2 million or 5.4% of premium representing a $17.5 million increase over the margin loaded in the 1996 rates. The modest increase in the projected dividend is attributable to a number of factors including an increase in the 1995 claim base offset by a decrease in the 1996 trend from 5.5% to 3.9%, and an $11.2 million decrease in the administrative expense. The amount of the gains and losses on the components of the program is significantly smaller than what was reported in the 2nd Quarter Report as Core premium was shifted to both the NY and PA Enhancements in an equitable manner. Since Participating Agencies with the Core Only option do not benefit from this shift, a premium credit will be calculated and applied to either the January or February 1997 bill.

MetraHealth Mental Health and Substance Abuse Program

MetraHealth projects a 1996 surplus of $17.5 million or 15.7% of premium for the Mental Health and Substance Abuse (MHSA) Program. This represents an increase of $12.7 million over the margin loaded in the 1996 rates and is the result of the improvement in reducing unnecessary and inappropriate inpatient utilization in the latter half of 1995 and through 1996. This improvement was not considered in the development of the 1996 rates. In addition, administrative expenses are approximately $4.2 million lower than the budgeted amounts.

Cigna

A 1996 dividend of $36.6 million or 11.6% of premium is estimated by Cigna. This represents a $27.9 million increase over the margin loaded in the 1996 rates. This increase is primarily attributable to higher than anticipated savings generated from the Select Pharmacy Network which became effective on September 1, 1995, and a reduction in the estimated 1996 trend from 17.6% to 12.0%.

1997 PREMIUM RATES

Exhibit II presents the 1997 projected Empire Plan gross and net rates in comparison to the 1996 rates. The 1997 net rates reflect the application of $133.5 million in dividends to all payors. Empire Plan gross premium will increase approximately .8% with a net premium increase at 5.3%. The higher rate increase of net premium in relation to the increase in the gross premium reflects the decreased level of dividend application in 1997.

Though the composite net rate increase was relatively moderate, the rate increase/decrease for the Non-Medicare Individual and Medicare Family coverages deviated somewhat significantly from the composite. This rate change reflects an adjustment based on the observed 1996 claim cost relationships as opposed to the estimated costs projected during July 1995 when precise Planprime/Mediprime costs were not available.

The underlying trend assumptions used by the carriers for the 1997 Participating Agency rates are as follows:

Component	Trend
Blue Cross	-1.1%
MetraHealth Medical Core	4.7%
MetraHealth Medical Enhancement	7.9%
MetraHealth MHSA Core	3.0%
MetraHealth MHSA Enhancement	3.0%
Cigna	14.7%
Composite	4.5%

These trend factors reflect the continuing favorable trends observed by the Empire Plan carriers which are reflective of strong claims management and prudent plan design changes over the recent years.

For comparison purposes, Exhibit Ill presents the Individual and Family rate history for the Core plus Medical and Psychiatric Enhancements option based on a Two Tier Empire Plan rate structure in effect prior to January 1, 1996.

KEEPING YOU INFORMED

Prescription Drug Rebid

The State and Medco Containment Insurance Company of New York were unable to reach agreement on a contract for the prescription drug component of the Empire Plan. The Department of Civil Service withdrew its conditional award and has taken the necessary steps to extend its current contract with CIGNA to ensure continuity of service for plan enrollees. The State will rebid the contract and issue a new Request for Proposal for this service.

Participating Agency Regional Meetings

The 1996 NYSHIP Regional Meetings for Participating Agency Executive Officers and Health Benefits Administrators are scheduled for December 12 in Albany County (Town of Guilderland), December 13 in Westchester County (Town of Mount Pleasant), December 16 in Nassau County (Town of Hempstead), and December 17 in Suffolk County (Town of Brookhaven). The agenda includes discussion of 1996 Empire Plan experience, the new rate schedule for 1997 and several important administrative and regulatory issues. Attachment A is an outline of the meeting presentation.

Exhibit I

1996 PROJECTED EMPIRE PLAN EXPERIENCE
In (000's)

	BLUE CROSS	METRAHEALTH MEDICAL Core	METRAHEALTH MEDICAL NY Enhancement	PA Enhancement	Combined	Core	METRAHEALTH MHSA NY Enhancement	METRAHEALTH MHSA PA Enhancement	Combined	CIGNA	TOTAL
Premium (1)	644,145	552,000	116,800	61,400	730,200	85,800	13,800	11,400	111,000	315,636	1,800,981
Incurred Claims (2)	510,233	490,500	69,700	59,800	620,000	63,800	7,100	5,900	76,800	264,665	1,471,698
Admin. Expenses (3)	30,384	56,319	8,440	6,248	71,007	13,269	1,899	1,571	16,739	14,367	132,497
Gain/Loss (A-B-C)	103,528	5,181	38,660	(4,648)	39,193	8,731	4,801	3,929	17,461	36,604	196,786

(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: 1996 3rd Quarter Report

Exhibit II

EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 1996 and Projected 1997 Rates
Mediprime Rate Structure

Empire Plan Option Core Only: Non-Medcare

	GROSS RATES (1) 1996	GROSS RATES (1) 1997	GROSS RATES (1) % Change	NET RATES (2) 1996	NET RATES (2) 1997	NET RATES (2) % Change
Individual (81)	225.10	226.25	0.5%	203.90	212.92	4.4%
Family (82)	499.74	465.78	-6.8%	450.19	436.52	-3.0%

Empire Plan Option Core Only: Medicare

	GROSS RATES (1) 1996	GROSS RATES (1) 1997	GROSS RATES (1) % Change	NET RATES (2) 1996	NET RATES (2) 1997	NET RATES (2) % Change
Individual	155.11	141.10	-9.0%	133.91	128.07	-4.4%
Family-1 Medicare	429.76	381.17	-11.7%	380.21	352.21	-7.4%
Family-2 Medicare	359.53	295.30	-11.7%	309.98	266.64	-14.0%

Core Plus Medical Enhancement: Non-Medicare

	GROSS RATES (1) 1996	GROSS RATES (1) 1997	GROSS RATES (1) % Change	NET RATES (2) 1996	NET RATES (2) 1997	NET RATES (2) % Change
Individual (61)	230.91	258.45	11.9%	204.00	238.01	16.7%
Family (62)	512.24	530.18	3.5%	449.50	484.94	7.9%

Core Plus Medical Enhancement: Medicare

	GROSS RATES (1) 1996	GROSS RATES (1) 1997	GROSS RATES (1) % Change	NET RATES (2) 1996	NET RATES (2) 1997	NET RATES (2) % Change
Individual	158.35	150.37	-5.0%	131.44	130.24	-0.9%
Family-1 Medicare	439.69	422.64	-3.9%	376.95	377.71	0.2%
Family-2 Medicare	366.90	313.84	-14.5%	304.16	269.22	-11.5%

Core Plus Medical and Psychiatric Enhancements: Medicare

	GROSS RATES (1) 1996	GROSS RATES (1) 1997	GROSS RATES (1) % Change	NET RATES (2) 1996	NET RATES (2) 1997	NET RATES (2) % Change
Individual (71)	234.59	261.80	11.6%	207.60	240.22	15.7%
Family (72)	521.96	537.96	3.1%	459.16	489.22	6.5%

Core Plus Medical and Psychiatric Enhancements: Non-Medicare

	GROSS RATES (1) 1996	GROSS RATES (1) 1997	GROSS RATES (1) % Change	NET RATES (2) 1996	NET RATES (2) 1997	NET RATES (2) % Change
Individual	158.65	150.53	-5.1%	131.72	129.28	-1.9%
Family-1 Medicare	446.03	427.23	-4.2%	383.30	378.82	-1.2%
Family-2 Medicare	369.87	315.24	-14.8%	307.07	267.15	-13.0%

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

Exhibit III

EMPIRE PLAN
PA GROUP RATES
1985-1997 Monthly Rates

Individual

Core plus Med. & Psych. Enh.	Gross rate	% Change	Net Rate	% Change
1985*	95.71		92.85
1986	91.97	-3.9%	91.45	-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	214.70	0.4%	193.54	-2.0%
1996 (4)	219.20	2.1%	192.27	-0.7%
1997	219.87	0.3%	198.37	3.2%

 

Average Percent Increase	Gross rate	% Change	Net Rate	% Change
From Inception		7.7%		7.1%
Most Recent 10 Years		8.4%		7.5%
Most Recent 5 Years		2.1%		1.8%

Family

Core plus Med. & Psych. Enh.	Gross rate	% Change	Net Rate	% Change
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	486.99	0.5%	440.35	-1.5%
1996 (4)	491.07	0.8%	428.27	-2.7%
1997	495.81	1.0%	447.22	4.4%

 

Average Percent Increase	Gross rate	% Change	Net Rate	% Change
From Inception		8.4%		7.8%
Most Recent 10 Years		9.1%		8.2%
Most Recent 5 Years		2.2%		1.9%

*Statewide Plan Premium Rates

(1) 1988 rates represent the effective amounts of the 1/88 and 8/88 rate changes.
(2) No change in effective net rate over 1989.
(3) Represents rates effective 1/1/91 - 6/30/91.
(4) Represents 2 tier Empire Plan Rates; 5 tier schedule effective 1/1/96.

1996 PARTICIPATING AGENCY
REGIONAL MEETING

Presented by:

The Employee Benefits Division
New York State Department of Civil Service
Projected 1996 Empire Plan Experience
($000,000)

	BLUE CROSS	METRAHEALTH MEDICAL Core	METRAHEALTH MEDICAL NY Enhancement	PA Enhancement	Combined	Core	METRAHEALTH MHSA NY Enhancement	METRAHEALTH MHSA PA Enhancement	Combined	CIGNA	TOTAL
Premium (1)	644	552	117	61	730	86	14	11	111	316	1,801
Incurred Claims (2)	510	491	70	60	620	64	7	5.9	77.0	265	1,472
Admin. Expenses (3)	30	56	8	6	71	13	2	1.5	16.5	14	132
Gain/Loss (A-B-C)	104	55	39	(5)	39	9	5	4	17.5	37	197

1997 GROSS and NET Participating Agency
Empire Plan Rates
(Core Plus medical and Psychiatric Enhancements)

Non-Medicare

	GROSS RATES (1) 1996	GROSS RATES (1) 1997	GROSS RATES (1) % Change	NET RATES (2) 1996	NET RATES (2) 1997	NET RATES (2) % Change
Individual (71)	234.59	261.80	11.6%	207.60	240.22	15.7%
Family (72)	521.96	537.96	3.1%	459.16	489.22	6.5%

Medicare

	GROSS RATES (1) 1996	GROSS RATES (1) 1997	GROSS RATES (1) % Change	NET RATES (2) 1996	NET RATES (2) 1997	NET RATES (2) % Change
Individual	158.65	150.53	-5.1%	131.72	129.28	-1.9%
Family-1 Medicare	446.03	427.23	-4.2%	383.30	378.82	-1.2%
Family-2 Medicare	369.87	315.24	-14.8%	307.07	267.15	-13.0%

Participating Agency Empire Plan Individual Rates
1986-1997

Core plus Med. & Psych. Enh.	Gross rate	% Change	Net Rate	% Change
1985*	95.71		92.85
1986	91.97	-3.9%	91.45	-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	214.70	0.4%	193.54	-2.0%
1996 (4)	219.20	2.1%	192.27	-0.7%
1997	219.87	0.3%	198.37	3.2%

 

Average Percent Increase	Gross rate	% Change	Net Rate	% Change
From Inception		7.7%		7.1%
Most Recent 10 Years		8.4%		7.5%
Most Recent 5 Years		2.1%		1.8%

Participating Agency Empire Plan Family Rates
1986-1997

Core plus Med. & Psych. Enh.	Gross rate	% Change	Net Rate	% Change
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	486.99	0.5%	440.35	-1.5%
1996 (4)	491.07	0.8%	428.27	-2.7%
1997	495.81	1.0%	447.22	4.4%

 

Average Percent Increase	Gross rate	% Change	Net Rate	% Change
From Inception		8.4%		7.8%
Most Recent 10 Years		9.1%		8.2%
Most Recent 5 Years		2.2%		1.9%

Administrative and Regulatory Issues

Leave without pay

• Current Regulations prohibit employer contribution for employees on leave without pay.
• Regulation change to allow ER contribution for up to two years for such things as:
• Short Term disability
• interim suspension
• sabbatical
• additional two years may be granted upon application by the employer to the Department of Civil Service
• Must continue to be an Employer/Employee Relationship

Withdrawing
Agency

• 90 day notice
• process enrollment transactions
• stop retiree deductions
• notify the Carriers
• produce the final bill
• Repay Reserve Receipts Transfer and Transitional Administrative Expense
• 1 year minimum before reentry in NYSHIP

Defaulting

• Payment due prior to start of coverage month
• Failure to pay full premium:
• agency in default
• coverage ends immediately
• 2 month minimum waiting period before reentry

Part time Employees

• Eligible to enroll if they work a regularly scheduled week of at least 20 hours or make at least $2,000 annually, and
• meet the definition of an employee
• If eligible, the Employer must contribute the minimum percentage toward the cost of both individual and dependent coverage (50% / 35%)

Classes of enrollees

• Allowed classes
• type of employment
• union affiliation
• Inappropriate or limited classes for withdrawal
• all active employees (may be ok for other purposes)
• mandatory vs voluntary withdrawl
• pre April 2, 1977 hires
• labor agreements
• Class can reenter at any time

Expulsion

Expulsion can occur for:

• Failure to carry out duties and responsibilities, including:
• Medical reimbursement
• Proper enrollments
• Distribution of materials
• Failure to abide by Program Policies and regulations

One year minimum waiting period before reentry

Medicare Part B Reimbursement

• 1997 Premium is $43.80 per month
• Can be reimbursed periodically - monthly, quarterly, or annually, for example
• No change in regulation requiring Participating Agencies ro reimburse