Empire Plan Quarterly Experience Report

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.

GEORGE E. PATAKI
GOVERNOR

STATE OF NEW YORK
DEPARTMENT OF CIVIL SERVICE
ALBANY, NEW YORK 12239
www.cs.ny.gov

GEORGE C. SINNOTT
COMMISSIONER
DANIEL E. WALL
EXECUTIVE
DEPUTY COMISSIONER

PA98-19

TO: Participating Agency Health Benefits Administrators
FROM: The Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: January 13, 1999

Enclosed are the Third Quarter Empire Plan Experience Report for 1998 and the cover letter to Chief Executive Officers.

This report provides projected 1998 experience and actual premium rates for 1999.

January 13, 1999

Dear Chief Executive Officer:

Attached is the Participating Agency Third Quarter Report for 1998. This report provides projected 1998 Empire Plan experience based on claims paid through September 1998 and actual 1999 premium rates.

The Empire Plan carriers project a combined surplus of approximately $26.9 million or 1.6% 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 1998.

The 1999 premium rates are included in Exhibit II. The gross and net premiums will increase approximately 4.9% and 7.2%, respectively. The report explains the basis for these rates.

The 1998 PA Regional Meetings for Chief Executive Officers and Health Benefits Administrators were held in November. The Keeping You Informed section of this report reviews some of the issues raised at these meetings and includes the agenda/handout materials as Attachment I.

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

Best wishes for a happy and prosperous New Year!

Sincerely,

Robert W. DuBois, CEBS
Director
Employee Benefits Division

EMPIRE PLAN EXPERIENCE REPORT
JULY - SEPTEMBER 1998
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 1998 EMPIRE PLAN EXPERIENCE

Based on claims paid through September 30, 1998, the Empire Plan carriers project a composite dividend of $26.9 million or 1.6% of premium. This represents a decrease of $13.7 million from the margin loaded in the 1998 rates. The 1998 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 1998 loss of $3.4 million or 0.6% of premium. This represents a decrease of $17.2 million from the margin loaded in the 1998 rates and is attributable to both a higher 1997 claim base and higher projected 1998 trend level than the respective factors used in the 1998 rate development.

UnitedHealthcare Medical

On average, UnitedHealthcare's 1998 underwriting assumptions were on target as evidenced by a composite 1998 dividend of $18.4 million or 2.4% of premium. This dividend level approximates the margin loaded in the 1998 rates.

UnitedHealthcare Mental Health and Substance Abuse Program

UnitedHealthcare projects a 1998 surplus of $8.3 million or 10.3% of premium for the Mental Health and Substance Abuse (MHSA) Program. This represents an increase of $6.4 million over the margin loaded in the 1998 rates and is primarily attributable to lower 1998 incurred claims.

Cigna

A 1998 dividend of $3.6 million or 1.1% of premium is projected by Cigna. This is $2.3 million less than the margin loaded in the 1998 rates and is attributable to a modestly higher claim base than what was projected at the time the 1998 rates were developed.

1999 PREMIUM RATES

Exhibit II presents the approved 1999 Empire Plan gross and net premium which include the application of $127.2 million in dividend to all payors. The Empire Plan gross premium increase is approximately 4.9%, while the net premium increase is 7.2%. The higher rate increase of net premium in relation to the increase in the gross premium reflects the decreased level of dividend application in 1999 as compared to 1998.

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.

KEEPING YOU INFORMED

1998 Participating Agency Regional Meetings

The PA Regional Meetings were held on November 12 in the Town of Colonie (Albany County), November 13 in the Town of Mount Pleasant (Westchester County) and November 16 in the Town of Brookhaven (Suffolk County). About 250 PA representatives attended. The agenda and handout materials are included in Attachment I of this report.

Following are some of the issues discussed at these meetings:

Unpaid Board Members

The Civil Service Law has been amended to allow unpaid board members of public authorities to participate in NYSHIP after they have served in that position for a minimum of six months. The employers of unpaid board members are not required to contribute toward the premium charges.

Empire Plan Network Expansion

A pilot program beginning January 1, 1999, will provide Empire Plan enrollees in the states of Florida, Connecticut and New Jersey with with substantially improved access to participating providers. In addition to Empire Plan participating providers, enrollees will also be able to use providers in UnitedHealthcare's Options Preferred Provider Organization increasing the number of participating providers in these threee states from 3,000 to over 22,000 (over 12,000 physicians in Florida alone). Enrollees in Florida, Connecticut and New Jersey will be notified directly through an Empire Plan Report and will be provided with a directory of providers.

Conversion When COBRA Ends

When a COBRA enrollee's coverage is terminated after the maximum period of coverage ends, the enrollee is entitled to obtain a conversion contract. If a COBRA enrollee's coverage is cancelled for non-payment of premium, the enrollee is not entitled to a conversion contract.

Dependent Survivor Contribution Rates

A dependent survivor(s) who is eligible to continue coverage in the NYS Health Insurance Program must pay the entire cost of coverage unless the PA elects administratively or through collective negotiations to any of the following arrangements:

The eligible spouse of:	Dependent survivor may pay:
an active enrollee	25% of the full cost of dependent coverage*

The eligible spouse of:	Dependent survivor may pay:
an active enrollee who dies after April 1, 1979; who, on the date of death, was entitled to a vested retirement allowance, was at least 45 years of age and was wthin ten years of minimum retirement age	25% of the full cost of dependent coverage*

The eligible spouse of:	Dependent survivor may pay:
an enrollee who retires after April 1, 1979, with at least ten years of service, and dies	25% of the full cost of dependent coverage*

*The 25% of dependent coverage rate applies whether the surviving spouse is enrolled for individual or family coverage.

See Section 252 of the Manual for Participating Subdivisions for details on dependent survivor coverage.

Hospitals in Suffolk County

Three hospitals in Suffolk County - Central Suffolk, Southampton and Eastern Long Island - which initially decided to terminate their contracts with Empire Blue Cross Blue Shield, have recently reached agreement to renew their contracts. Please note, however, that coverage under NYSHIP's Empire Plan would not be affected regardless of the outcome of these negotiations.

Exhibit I

1998 PROJECTED EMPIRE PLAN EXPERIENCE
In (000's)

	BLUE CROSS	UnitedHealthcare MEDICAL (4) Core	UnitedHealthcare MEDICAL (4) NY Enhancement	UnitedHealthcare MEDICAL (4) PA Enhancement	Combined	Core	UnitedHealthcare MHSA NY Enhancement	UnitedHealthcare MHSA PA Enhancement	Combined	CIGNA	TOTAL
Premium (1)	542,734	605,070	90,620	63,329	759,019	66,257	8,044	5,589	79,890	340,978	1,722,621
Incurred Claims (2)	515,684	535,498	77,746	49,767	663,011	49,518	4,440	3,483	57,441	325,006	1,561,142
Admin. Expenses (3)	30,426	63,976	7,876	5,728	77,580	12,076	1,221	890	14,187	12,383	134,576
Gain/ Loss (A-B-C)	(3,376)	5,596	4,998	7,834	18,428	4,663	2,383	1,216	8,262	3,589	26,903

(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: 1998 3rd Quarter Report

Exhibit II

EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 1998 and Final 1999 Rates
Mediprime Rate Structure

CORE ONLY

Non-Medicare	Gross Rates(1) 1998	Gross Rates(1) 1999	Gross Rates(1) % Change	Net Rates(2) 1998	Net Rates(2) 1999	Net Rates(2) % Change
Individual (81)	233.78	247.05	5.7%	213.42	233.20	9.3%
Family (82)	483.20	507.42	5.0%	438.81	476.31	8.5%

Medicare	Gross Rates(1) 1998	Gross Rates(1) 1999	Gross Rates(1) % Change	Net Rates(2) 1998	Net Rates(2) 1999	Net Rates(2) % Change
Individual	161.07	178.22	10.6%	144.57	169.33	17.1%
Family - 1 medicare	411.20	439.33	6.8%	370.65	413.18	11.5%
Family - 2 medicare	337.71	369.71	9.5%	301.00	348.51	15.8%

CORE PLUS MEDICAL ENHANCEMENT

Non-Medicare	Gross Rates(1) 1998	Gross Rates(1) 1999	Gross Rates(1) % Change	Net Rates(2) 1998	Net Rates(2) 1999	Net Rates(2) % Change
Individual (81)	265.36	277.67	4.6%	244.95	260.48	6.3%
Family (82)	546.09	568.84	4.2%	501.95	530.54	5.7%

Medicare	Gross Rates(1) 1998	Gross Rates(1) 1999	Gross Rates(1) % Change	Net Rates(2) 1998	Net Rates(2) 1999	Net Rates(2) % Change
Individual	161.82	186.36	11.0%	151.35	175.61	16.0%
Family - 1 medicare	449.26	478.26	6.5%	408.71	446.33	9.2%
Family - 2 medicare	350.95	386.15	10.0%	314.34	360.73	14.8%

CORE PLUS MEDICAL AND PSYCHIATRIC ENHANCEMENTS

Non-Medicare	Gross Rates(1) 1998	Gross Rates(1) 1999	Gross Rates(1) % Change	Net Rates(2) 1998	Net Rates(2) 1999	Net Rates(2) % Change
Individual (81)	267.89	279.56	4.4%	246.07	261.18	6.1%
Family (82)	552.00	573.33	3.9%	503.78	531.89	5.6%

Medicare	Gross Rates(1) 1998	Gross Rates(1) 1999	Gross Rates(1) % Change	Net Rates(2) 1998	Net Rates(2) 1999	Net Rates(2) % Change
Individual	167.91	186.46	11.0%	151.34	175.61	16.0%
Family - 1 medicare	452.73	480.95	6.2%	409.76	447.05	9.1%
Family - 2 medicare	351.98	387.05	10.0%	314.25	360.66	14.8%

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

Exhibit III

EMPIRE PLAN
PA GROUP RATES
1985-1999 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%
1998	227.35	3.4%	204.38	3.0%
1999	239.24	5.2%	222.00	8.6%

Average Percent Increase

From Inception	7.2%	6.9%
Most Recent 10 Years	3.6%	2.9%
Most Recent 5 Years	2.3%	2.4%

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	485.99	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	539.14	4.8%	499.75	7.8%

Average Percent Increase

From Inception	7.8%	7.5%
Most Recent 10 Years	3.6%	2.8%
Most Recent 5 Years	2.2%	2.3%

*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