The Empire Plan is a unique health insurance plan designed especially for public employees in New York State. Empire Plan benefits include inpatient and outpatient hospital coverage, medical/surgical coverage, Centers of Excellence for transplants, infertility and cancer, home care services, equipment and supplies, mental health and substance abuse coverage and prescription drug coverage.
GOVERNOR
DEPARTMENT OF CIVIL SERVICE
ALBANY, NEW YORK 12239
www.cs.ny.gov
COMMISSIONER
DANIEL E. WALL
EXECUTIVE
DEPUTY COMISSIONER
PA98-04
TO: Participating Agency Health Benefits Administrators
FROM: The Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: March 17, 1998
Enclosed are the Fourth Quarter Empire Plan Experience Report for 1997 and the cover letter to Chief Executive Officers.
This report provides projected 1997 experience and projected premium rates for 1999.
March 17, 1997
Dear Chief Executive Officer:
Attached is the Participating Agency Fourth Quarter Report for 1997. This report provides projected 1997 Empire Plan experience based on claims paid through December 1997 and projected 1999 premium rates.
The Empire Plan carriers project a combined surplus of approximately $87.5 million or 5.0% of premium. The report includes details for each of the carriers and, as in the past, these projections will be revised in the next quarterly report based on actual claims experience for 1997.
Initial projections of 1999 premium rates reflect increases of approximately 6.9% in the gross rates and 9.7% in the net rates. These preliminary projections have been made without any claims experience for 1998. The report explains the basis for these projections and future reports will include revisions based on actual claims data available.
I hope this report is informative and useful to you. If you have any questions, comments or suggestions, please do not hesitate to contact me.
Sincerely,
Robert W. DuBois, CEBS
Director
Employee Benefits Division
EMPIRE PLAN EXPERIENCE REPORT
OCTOBER - DECEMBER 1997
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
4TH QUARTER REPORT
PROJECTED 1997 EMPIRE PLAN EXPERIENCE
Based on claims paid through December 1997, the Empire Plan carriers project a composite surplus of $87.5 million or 5.0% of premium. This represents an increase of $36.6 million from the margin loaded in the 1997 rates. The 1997 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 1997 dividend of $31.6 million or 5.6% of premium, which is $14.1 million more than the margin loaded in the 1997 rates. The rating of this component of the Empire Plan was very good given the uncertainties of the impact of the HCRA legislation, that went into effect on January 1, 1997. In general, the dividend increase is attributable to modestly lower 1997 claim and retention costs than were projected when the rates were developed.
UnitedHealthcare Medical
UnitedHealthcare projects a composite 1997 dividend of $28.5 million or 3.8% of premium representing a $6.3 million increase over the margin loaded in the 1997 rates. This modest dividend increase is due to the overestimation of the Health Care Reform Act (HCRA) charge partially offset by an understatement of the Open and Unreported Claims Reserve as of December 31, 1996.
UnitedHealthcare Mental Health and Substance Abuse Program
UnitedHealthcare projects a 1997 surplus of $23.5 million or 23.2% of premium for the Mental Health and Substance Abuse (MHSA) Program. The additional $21.0 million over margin is attributable to the continuous improvement in shifting unnecessary and inappropriate inpatient utilization to a lower cost outpatient setting. Also, both HCRA Bad Debt and Charity Assessment and retention are projected to be lower than 1997 rate development estimates.
Cigna
A 1997 dividend of $3.9 million or 1.2% of premium is estimated by Cigna. This represents a $4.8 million decrease over the margin loaded in the 1997 rates and is primarily attributable to a moderate upturn in trend partially offset by higher than expected cash flow interest credits.
1999 PREMIUM RATES
Exhibit II presents the projected 1999 Empire Plan gross and net rates in comparison to the 1998 rates. In this projection, 1999 net rates assume the application of $126.0 million in dividend to all payors. Empire Plan gross premium would increase approximately 6.9% with a net premium increase of 9.7%. The higher rate increase of net premium in relation to the increase in the gross premium reflects the projected decreased level of dividend application in 1999.
Effective January 1, 1999, new contracts are expected to be awarded for the Prescription Drug and Managed Mental Health and Substance Abuse Programs. It is not yet known what impact, if any, these contract awards may have on projected 1999 rates. Each Participating Agency should assess its financial situation in using the quoted range of rates.
The projected net rate increase for the MediPrime group is approximately 6 percentage points higher than the average rate increase and 7.5 percentage points higher than the projected rate increase for the PlanPrime group. Such difference is primarily attributable to the leveraging of the prescription drug trend on the MediPrime rates as opposed to that of PlanPrime rates. Prescription drugs which are trending at 14.5% make up approximately 57% of total premium for a Mediprime enrollee compared to 17% for a PlanPrime enrollee. In addition, the reduction of prescription drug dividends in 1999 from the 1998 levels compounds the deviation in the rates of increase between MediPrime and PlanPrime groups.
The underlying trend assumptions used by the carriers for the projected 1999 Participating Agency rates are as follows:
| Component | Trend |
|---|---|
| Blue Cross | 3.7% |
| UnitedHealthcare Medical Core | 4.9% |
| UnitedHealthcare Medical Enhancement | 7.9% |
| UnitedHealthcare MHSA Core | 0.0% |
| UnitedHealthcare MHSA Enhancement | 0.0% |
| Cigna | 14.5% |
| Composite | 6.7% |
Although the industry is predicting an upturn in trend for 1998 and 1999, we are confident that through strong management and prudent plan design, Empire Plan trend will continue to be below industry averages.
For comparison purposes, Exhibit Ill presents the Individual and Family rate history for the Core Plus Medical and Psychiatric Enhancements option based on the Two Tier Empire Plan rate structure in effect prior to January 1, 1996, while Exhibit IV presents the five tier history from 1996 to projected 1999.
Exhibit I
1997 PROJECTED EMPIRE PLAN EXPERIENCE
In (000's)
|
| BLUE CROSS | UnitedHealthcare MEDICAL - Core | UnitedHealthcare MEDICAL - | UnitedHealthcare MEDICAL - | UnitedHealthcare MEDICAL - | GHI MHSA - Core | GHI MHSA - | GHI MHSA - | GHI MHSA - | CIGNA | TOTAL |
|---|---|---|---|---|---|---|---|---|---|---|---|
| A Premium (1) | 565,133 | 593,400 | 83,400 | 76,300 | 753,100 | 82,400 | 10,400 | 8,500 | 101,300 | 312,005 | 1,731,538 |
| B Incurred Claims (2) | 502,514 | 519,928 | 71,237 | 59,105 | 650,270 | 49,778 | 6,821 | 5,119 | 61,718 | 294,615 | 1.509,117 |
| C Administrative Expense (3) | 31,039 | 60,058 | 7,962 | 6,355 | 74,375 | 13,186 | 1,557 | 1,293 | 16,036 | 13,513 | 134,963 |
| D Gain/(Loss) (A-B-C) | 31,580 | 13,414 | 4,201 | 10,840 | 28,455 | 19,436 | 2,022 | 2,088 | 23,546 | 3,877 | 87,458 |
(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: 1997 4th Quarter Report
Exhibit II
EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 1998 and Projected 1999 Rates
CORE ONLY
Plan Prime - Individual
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 233.78 | 239.32 | 2.4% | 213.42 | 224.17 | 5.0% |
| Best Estimate | 233.78 | 247.76 | 6.0% | 213.42 | 232.61 | 9.0% |
| Pessimistic | 233.78 | 254.49 | 8.9% | 213.42 | 239.34 | 12.1% |
Plan Prime - Family
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 483.20 | 494.39 | 2.3% | 438.81 | 460.57 | 5.0% |
| Best Estimate | 483.20 | 511.74 | 5.9% | 438.81 | 477.92 | 8.9% |
| Pessimistic | 483.20 | 525.62 | 8.8% | 438.81 | 491.80 | 12.1% |
MediPrime - Individual
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 161.07 | 173.95 | 8.0% | 144.57 | 165.00 | 14.1% |
| Best Estimate | 161.07 | 177.94 | 10.5% | 144.57 | 168.99 | 16.9% |
| Pessimistic | 161.07 | 180.89 | 12.3% | 144.57 | 171.94 | 18.9% |
MediPrime - Family 1
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 411.20 | 429.72 | 4.5% | 370.65 | 402.11 | 8.5% |
| Best Estimate | 411.20 | 442.62 | 7.6% | 370.65 | 415.01 | 12.0% |
| Pessimistic | 411.20 | 452.72 | 10.1% | 370.65 | 425.11 | 14.7% |
MediPrime - Family 2
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 337.71 | 363.61 | 7.7% | 301.00 | 342.19 | 13.7% |
| Best Estimate | 337.71 | 372.06 | 10.2% | 301.00 | 350.64 | 16.5% |
| Pessimistic | 337.71 | 378.37 | 12.0% | 301.00 | 356.95 | 18.6% |
(1) Represents premiums charged by the carriers.
(2) Represents cost to a participating agency.
Exhibit II
EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 1998 and Projected 1999 Rates
CORE PLUS MEDICAL ENHANCEMENT
Plan Prime - Individual
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 265.36 | 271.39 | 2.3% | 244.95 | 254.46 | 3.9% |
| Best Estimate | 265.36 | 281.52 | 6.1% | 244.95 | 264.59 | 8.0% |
| Pessimistic | 265.36 | 289.93 | 9.3% | 244.95 | 273.00 | 11.5% |
Plan Prime - Family
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 546.09 | 558.24 | 2.2% | 501.61 | 520.63 | 3.8% |
| Best Estimate | 546.09 | 578.96 | 6.0% | 501.61 | 541.35 | 7.9% |
| Pessimistic | 546.09 | 596.20 | 9.2% | 501.61 | 558.59 | 11.4% |
MediPrime - Individual
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 167.82 | 180.81 | 7.7% | 151.35 | 170.22 | 12.5% |
| Best Estimate | 167.82 | 185.16 | 10.3% | 151.35 | 174.57 | 15.3% |
| Pessimistic | 167.82 | 188.47 | 12.3% | 151.35 | 177.88 | 17.5% |
MediPrime - Family 1
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 449.26 | 468.37 | 4.3% | 408.71 | 437.10 | 6.9% |
| Best Estimate | 449.26 | 483.30 | 7.6% | 408.71 | 452.03 | 10.6% |
| Pessimistic | 449.26 | 495.44 | 10.3% | 408.71 | 464.17 | 13.6% |
MediPrime - Family 2
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 350.95 | 377.05 | 7.4% | 314.34 | 352.12 | 12.0% |
| Best Estimate | 350.95 | 386.21 | 10.0% | 314.34 | 361.28 | 14.9% |
| Pessimistic | 350.95 | 393.22 | 12.0% | 314.34 | 368.29 | 17.2% |
(1) Represents premiums charged by the carriers.
(2) Represents cost to a participating agency.
Exhibit II
EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 1998 and Projected 1999 Rates
CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS
Plan Prime - Individual
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 267.89 | 273.90 | 2.2% | 246.07 | 256.14 | 4.1% |
| Best Estimate | 267.89 | 284.03 | 6.0% | 246.07 | 266.27 | 8.2% |
| Pessimistic | 267.89 | 292.44 | 9.2% | 246.07 | 274.68 | 11.6% |
Plan Prime - Family
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 552.00 | 564.11 | 2.2% | 503.78 | 524.30 | 4.1% |
| Best Estimate | 552.00 | 584.83 | 5.9% | 503.78 | 545.02 | 8.2% |
| Pessimistic | 552.00 | 602.07 | 9.1% | 503.78 | 562.26 | 11.6% |
MediPrime - Individual
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 167.91 | 180.90 | 7.7% | 151.34 | 170.25 | 12.5% |
| Best Estimate | 167.91 | 185.25 | 10.3% | 151.34 | 175.32 | 15.8% |
| Pessimistic | 167.91 | 188.56 | 12.3% | 151.34 | 177.91 | 17.6% |
MediPrime - Family 1
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 452.73 | 471.81 | 4.2% | 409.76 | 439.13 | 7.2% |
| Best Estimate | 452.73 | 486.74 | 7.5% | 409.76 | 454.78 | 11.0% |
| Pessimistic | 452.73 | 498.88 | 10.2% | 409.76 | 466.20 | 13.8% |
MediPrime - Family 2
| Gross Rates(1) | Gross Rates(1) | Gross Rates(1) | Net Rates(2) | Net Rates(2) | Net Rates(2) | |
|---|---|---|---|---|---|---|
| Optimistic | 351.98 | 378.07 | 7.4% | 314.25 | 352.50 | 12.2% |
| Best Estimate | 351.98 | 387.23 | 10.0% | 314.25 | 363.10 | 15.5% |
| Pessimistic | 351.98 | 394.24 | 12.0% | 314.25 | 368.67 | 17.3% |
(1) Represents premiums charged by the carriers.
(2) Represents cost to a participating agency.
Exhibit III
EMPIRE PLAN
PA GROUP RATES
1985-1998 Monthly Rates
Individual
| Year | Gross Rate | % Changes | 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% |
| 1998 | 227.35 | 3.4% | 204.38 | 3.0% |
| 1999 | 243.74 | 7.2% | 227.91 | 11.5% |
Individual Average Percent Increase
| Gross Rate % Changes | Net Rate % Change | |
|---|---|---|
| From Inception | 7.4% | 7.1% |
| Most Recent 10 Years | 3.8% | 3.2% |
| Most Recent 5 Years | 2.7% | 3.0% |
Family
| Year | Gross Rate | % Changes | 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% |
| 1998 | 514.28 | 3.7% | 463.62 | 3.7% |
| 1999 | 549.34 | 6.8% | 513.17 | 10.7% |
Family Average Percent Increase
| Gross Rate % Changes | Net Rate % Change | |
|---|---|---|
| From Inception | 8.0% | 7.7% |
| Most Recent 10 Years | 3.8% | 3.1% |
| Most Recent 5 Years | 2.6% | 2.9% |
*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.
Exhibit IV
EMPIRE PLAN
PA 5 TIER GROUP RATES
1995 - 1999 Monthly Rates
Individual Planprime
| Year | Gross Rate | % Changes | Net Rate | % Change |
|---|---|---|---|---|
| 1995 | 214.70 | | 193.54 | |
| 1996 (3) | 234.59 | 9.3% | 207.66 | 7.3% |
| 1997 | 261.80 | 11.6% | 240.22 | 15.7% |
| 1998 | 267.89 | 2.3% | 246.07 | 2.4% |
| 1999 (projected) | 284.03 | 6.0% | 266.27 | 8.2% |
Individual Planprime Average Percent Increase
| Gross Rate % Changes | Net Rate % Change | |
|---|---|---|
| From Inception of 5 Tier Structure | 7.3% | 8.4% |
| From 1985 to 1995 | 9.9% | 9.2% |
Family Planprime
| Year | Gross Rate | % Changes | Net Rate | % Change |
|---|---|---|---|---|
| 1995 | 486.99 | 0.5% | 440.35 | -1.5% |
| 1996 (3) | 521.96 | 7.2% | 459.16 | 4.3% |
| 1997 | 537.96 | 3.1% | 489.22 | 6.5% |
| 1998 | 552.00 | 2.6% | 503.78 | 3.0% |
| 1999 (projected) | 584.83 | 5.9% | 545.02 | 8.2% |
Family Planprime Average Percent Increase
| Gross Rate % Changes | Net Rate % Change | |
|---|---|---|
| From Inception of 5 Tier Structure | 4.7% | 5.5% |
| From 1985 to 1995 | 9.9% | 9.2% |
Individual Medprime
| Year | Gross Rate | % Changes | Net Rate | % Change |
|---|---|---|---|---|
| 1995 | 214.70 | 193.54 | ||
| 1996 (3) | 158.65 | -26.1 | 131.72 | -31.9% |
| 1997 | 150.53 | -5.1% | 129.28 | -1.9% |
| 1998 | 167.91 | 11.5% | 151.34 | 17.1% |
| 1999 (projected) | 185.25 | 10.3% | 175.32 | 15.8% |
Individual Medprime Average Percent Increase
| Gross Rate % Changes | Net Rate % Change | |
|---|---|---|
| From Inception of 5 Tier Structure | -2.3% | -0.2% |
| From 1985 to 1995 | 9.0% | 8.3% |
Family - 1 Medprime
| Year | Gross Rate | % Changes | Net Rate | % Change |
|---|---|---|---|---|
| 1995 | 486.99 | 440.35 | ||
| 1996 (3) | 446.03 | -8.4% | 383.23 | -13.0% |
| 1997 | 427.23 | -4.2% | 378.82 | -1.2% |
| 1998 | 452.73 | 6.0% | 409.76 | 8.2% |
| 1999 (projected) | 486.74 | 7.5% | 454.76 | 8.2% |
Family - 1 Medprime Average Percent Increase
| Gross Rate % Changes | Net Rate % Change | |
|---|---|---|
| From Inception of 5 Tier Structure | -2.3% | -0.2% |
| From 1985 to 1995 | 9.0% | 8.3% |
Family - 2 or More Medprime
| Year | Gross Rate | % Changes | Net Rate | % Change |
|---|---|---|---|---|
| 1995 | 486.99 | | 440.35 | |
| 1996 (3) | 369.87 | -24.0% | 307.07 | -30.3% |
| 1997 | 315.24 | -14.8% | 267.15 | -13.0% |
| 1998 | 351.98 | 11.7% | 314.25 | 17.6% |
| 1999 (projected) | 387.23 | 10.0% | 363.10 | 15.5% |
Family - 2 or More Medprime Average Percent Increase
| Gross Rate % Changes | Net Rate % Change | |
|---|---|---|
| From Inception of 5 Tier Structure | -4.3% | -2.5% |
| From 1985 to 1995 | 9.9% | 9.2% |
(1) Represents premiums charged by the carrriers
(2) Represents cost to a participating agency
(3) Inception of MediPrime Rate Structure