Department of Civil Service

PA99-07

TO: Participating Agency Health Benefits Administrators
FROM: The Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: June 25, 1999

Enclosed are the First Quarter Empire Plan Experience Report for 1999 and the cover letter to Chief Executive Officers.

This report provides the final 1998 experience, projected 1999 experience and projected premium rates for the year 2000.

June 25, 1999

Dear Chief Executive Officer:

Attached is the Participating Agency First Quarter Report for 1999. This report provides final 1998 Empire Plan experience, projected 1999 Empire Plan experience based on claims paid through March, 1999 and projected 2000 premium rates.

The Empire Plan carriers have declared a combined surplus of $36.2 million or 2.1% of premium. A review of the annual experience of each of the carriers is included in the report.

Initial projections of 1999 experience, based on claims paid through March, 1999 reflect a surplus of approximately $10.5 million or 0.5% 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 additional claims experience for 1999.

The 2000 premium projections are included in Exhibit III. These projections reflect increases of approximately 11.9% in the gross rates and 17.1% in the net rates. The report explains the basis for these initial projections and future reports will include revisions based on actual claims data available.

The Keeping You Informed section of the report includes information on NYBEAS, the New York Benefits Eligibility and Accounting System. Our plan is to implement NYBEAS for Participating Agencies by Fall 1999. Please complete and retum the form on Attachment I which will provide us with important information about your Agency's computer capabilities to convert to this new system.

The Employee Benefits Division is now able to transmit reports to you via E-mail. The Keeping You Informed section explains the details. If you are interested in using this technology to receive future reports, please complete and return the form on Attachment 2.

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.

Sincerely,

Robert W. DuBois, CEBS
Director
Employee Benefits Division

EMPIRE PLAN EXPERIENCE REPORT
JANUARY - MARCH 1999
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
1ST QUARTER REPORT

1998 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers have declared a composite dividend of $36.2 million or 2.1% of premium. The declared dividend is $4.4 million less than the margin loaded in the 1998 rates and represents a deviation of less than .3% of premium. In sum, 1998 was a very accurate underwriting year. The 1998 annual experience reported by the insurance carriers is presented in Exhibit I while the individual carrier dividends are explained as follows:

Blue Cross

Blue Cross's underwriting assumptions were on target as evidenced by a declared 1998 dividend of $16.9 million (3.1% of premium). This represents an increase of $3.1 million from the margin loaded in the 1998 rates.

United Health Care Medical

UnitedHealthcare declared a composite dividend of $11.3 million (1.5% or premium). This is a decrease of $7.8 million from the margin loaded in the 1998 rates. This modest reduction from margin is attributable to slightly higher claims experience in 1998 from what was projected at the time the 1998 rates were developed.

UnitedHealthcare Mental Health and Substance Abuse Program

UnitedHealthcare declared a 1998 surplus of $7.8 million (9.7% of premium) for the Mental Health and Substance Abuse (MHSA) Program. This is $5.9 million more than the margin loaded in the 1998 rates and is primarily attributable to sound utilization and network management which produced lower 1998 incurred claims.

Cigna

CIGNA declared a 1998 dividend of $270,000, which is $5.6 million less than the margin loaded in the 1998 rates. This reduction is attributable to a higher claim base than was projected when the 1998 rates were developed.

PROJECTED 1999 EMPIRE PLAN EXPERIENCE

Based on claims paid through March 31, 1999, the Empire Plan carrier project a composite dividend of $10.5 million (0.5% of premium), or $26.2 million less than the margin loaded in the 1999 rates. The 1999 annual experience projected by the insurance carriers is reported in Exhibit II with individual carrier projections explained as follows:

Blue Cross

Blue Cross projects a 1999 gain of $33.6 million (5.3% of premium). This is $18.1 million more than the margin loaded in the 1999 rates and is primarily attributable to a lower 1998 claims base than was used in the 1999 rate development.

United Health Care Medical

UnitedHealthcare projects a composite 1999 dividend of $20.7 million (2.4% of premium) representing a $1.0 million increase over the margin loaded in the 1999 rates. There are no material variances in the quarterly estimates and those made at renewal.

Group Health Incorporated Mental Health and Substance Abuse Program

Group Health Incorporated projects a 1999 surplus of $1.1 million (1.8% of premium) for the Mental Health and Substance Abuse (MHSA) Program, or $456,000 less than the margin loaded in the 1999 rates. There are no material variances in the quarterly estimates and those made at renewal.

Cigna

A 1999 loss of $44.9 million representing 10.5% of premium is projected by Cigna. This loss is primarily attributable to an increase in prescription drug trends over the last two years from 15% to approximately 20%. This projection was reviewed by the Division's consultant and viewed to be rather conservative.

PROJECTED 2000 PREMIUM RATES

Exhibit Ill presents the projected 2000 Empire Plan gross and net premium assuming the application of $69.5 million in dividend to all payors. The Empire Plan gross premium is projected to increase approximately 11.9% with a net premium increase of 17.1%. The higher rate increase of net premium in relation to the increase in the gross premium reflects the decreased level of available dividend to be applied in 2000 as compared to 1999.

Insurance markets in general and NYSHIP, in particular, are rather dynamic and insurance companies are typically conservative. As a consequence, these estimates for the year 2000 should be considered "soft" after only one quarter of experience.

Two items of note are the return of Nassau County (26,000 enrollees) to NYSHIP, effective April 1, 1999, and the resumption of coverage for 47,000 CSEA enrollees under the NYSHIP Prescription Drug Program, effective April 29, 1999.

For comparison purposes, Exhibit IV 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 V presents the five tier history from 1996 to 2000.

KEEPING YOU INFORMED

NYBEAS (New York Benefits Eligibility and Accounting System)

The Employee Benefits Division is in the process of converting the NYSHIP eligibility and accounting systems into one system called NYBEAS. Once it is operational, NYBEAS will enable us to significantly improve the enrollment and accounting functions. Our timetable is to implement NYBEAS for Participating Agencies by Fall of 1999. Prior to that time, we will update the PA Manual and provide training to familiarize you and your staff with the new system.

To assist us in planning for this implementation, we will require information on the extent to which your agency is equipped to handle NYBEAS. Attachment I is a survey form which includes the computer requirements for utilizing this new system and questions relating to your agency 5 hardware and software capabilities. Please complete and retum this form as soon as possible to Mr. Stephen Kavanaugh.

Transmission of Reports Electronically

The Employee Benefits Division now has the capability to transmit the Participating Agency Quarterly Experience Report via E-mail. Using a software product called Adobe Acrobat Reader, the PA Quarterly Report is converted into portable document format (PDF). This is a format that can be read by any recipient, if they have Adobe Acrobat Reader installed on their system. Adobe Acrobat Reader is available free from the Internet. For your reference, Attachment 2 includes the instructions on how to obtain Adobe Acrobat Reader.

There are many advantages to receiving the reports electronically including: reports will be received sooner; there will be less paper to handle; and the reports can be stored electronically and/or a hard copy may be printed.

If you would like to receive the report electronically, please provide your E-mail address by completing the bottom section of Attachment 2 and returning it to the Employee Benefits Division.

NYSHIP Representation at Municipal Events

NYSHIP's Empire Plan was represented at the 1999 Annual Meeting sponsored by the NYS Conference of Mayors on June 6-9,1999, in Saratoga Springs and at the 1999 Spring Training Conference sponsored by the NYS Association of Civil Service and Personnel Officers on June 6-9, 1999, in Chautauqua County.

Name and Address Changes

Please be sure to notify the Employee Benefits Division of any changes so that we may keep our mailing lists up-to-date. This updated information may be sent to:

Mr. Stephen Kavanaugh
Assistant Director
Employee Benefits Division
NYS Department of Civil Service
State Office Building Campus
Building #1, Rm. 159
Albany, New York I 2239

NYBEAS ACCESS SURVEY

Access Requirements for NYBEAS:

• Desk-top Computer running Windows 3.1, 95 or newer
  
• Modem connected to an outside phone line

NOTE: The NYS Department of Civil Service will supply all software necessary to access your agency's data only.

System security requires use of password by authorii:ed individuals only. We recommend that each agency designate two authorized users - a primary contact and a back-up contact. Please complete the attached user ID request form (one for each user) and mail or fax back with this certificatlon by July 15, 1999, to the Department of Civil Service.

Questions about the computer requirements or connecting to NYBEAS may be directed to the NYS Department of Civil Service Help Desk at:

1-800-422-3671
(518) 457-5406

TRANSMISSION OF REPORTS ELECTRONICALLY

Instructions to read PDF files using ADOBE ACROBAT READER™

What is PDF?

It is a file format compatible with many different computers and printers. Adobe Acrobat Reader comes in versions that run in DOS, Windows, Mac, UNIX and OS/2. Be sure to download the correct version. Their page contains download instructions.

Disclaimer

The Department of Civil Service is not responsible for Adobe Acrobat Reader or your use of it. The information provided herein is provided for your convenience and does not in any way constitute an endorsement of this software product or company.

To Download

Go to Adobe Systems Web Page at:

http://www.adobe.com/supportservice/custsupport/download.html

Follow instructions for downloading under:

• Acrobat Reader
• Macintosh
• Windows
• DOS
• UNIX
• OS/2

Exhibit I

1998 EMPIRE PLAN EXPERIENCE
In (000's)

	BLUE CROSS	UnitedHealthcare MEDICAL - Core	UnitedHealthcare MEDICAL - NY Enhancement	UnitedHealthcare MEDICAL - PA Enhancement	UnitedHealthcare MEDICAL - Combined	METRAHEALTH MHSA - Core	METRAHEALTH MHSA - NY Enhancement	METRAHEALTH MHSA - PA Enhancement	METRAHEALTH MHSA - Combined	CIGNA	TOTAL
Premium (1)	543,715	605,517	90,559	63,547	759,623	66,307	8,039	5,608	79,954	342,764	1,726,056
Incurred Claims (2)	499,408	545,743	77,857	50,270	673,870	50,181	4,181	3,261	57,623	330,340	1,561,241
Administrative Expense (3)	27,422	60,639	7,907	5,929	74,475	12,393	1,259	907	14,559	12,154	128,610
D Gain/(Loss) (A-B-C)	16,885	(865)	4,795	7,348	11,278	3,733	2,599	1,440	7,772	270	36,205

(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 Final Experience Statement

---

Exhibit II

1999 EMPIRE PLAN EXPERIENCE
In (000's)

	BLUE CROSS	METRAHEALTH MEDICAL - Core	METRAHEALTH MEDICAL - NY Enhancement	METRAHEALTH MEDICAL - PA Enhancement	METRAHEALTH MEDICAL - Combined	METRAHEALTH MHSA - Core	METRAHEALTH MHSA - NY Enhancement	METRAHEALTH MHSA - PA Enhancement	METRAHEALTH MHSA - Combined	CIGNA	TOTAL
Premium (1)	639,337	688,449	88,572	73,281	850,302	53,350	6,068	5,037	64,455	426,130	1,980,224
Incurred Claims (2)	570,796	595,362	77,880	57,503	730,745	42,503	4,764	4,013	51,280	457,110	1,809,931
Administrative Expense (3)	34,971	80,792	10,162	7,858	98,812	9,965	1,133	940	12,038	13,960	159,781
D Gain/(Loss) (A-B-C)	33,570	12,295	530	7,920	20,745	882	171	84	1,137	(44,940)	10,512

(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: 1999 1st Quarter report

---

Exhibit III

EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 1999 and Projected 2000 Rates
CORE ONLY

Plan Prime - Individual

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	247.05	265.62	7.5%	233.20	259.82	11.4%
Best Estimate	247.05	273.21	10.6%	233.20	267.41	14.7%
Pessimistic	247.05	281.20	13.8%	233.20	275.40	18.1%

Plan Prime - Family

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	507.42	545.04	7.4%	476.31	533.15	11.9%
Best Estimate	507.42	560.78	10.5%	476.31	548.89	15.2%
Pessimistic	507.42	577.36	13.8%	476.31	565.47	18.7%

MediPrime - Individual

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	178.22	213.47	19.8%	169.33	210.07	24.1%
Best Estimate	178.22	216.72	21.6%	169.33	213.32	26.0%
Pessimistic	178.22	220.27	23.6%	169.33	216.87	28.1%

MediPrime - Family 1

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	439.33	493.69	12.4%	413.18	484.19	17.2%
Best Estimate	439.33	505.10	15.0%	413.18	495.60	19.9%
Pessimistic	439.33	517.24	17.7%	413.18	507.74	22.9%

MediPrime - Family 2

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	369.71	440.69	19.2%	348.51	433.59	24.4%
Best Estimate	369.71	447.76	21.1%	348.51	440.66	26.4%
Pessimistic	369.71	455.44	23.2%	348.51	448.34	28.6%

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

---

Exhibit III

EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 1999 and Projected 2000 Rates
CORE PLUS MEDICAL ENHANCEMENT

Plan Prime - Individual

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	277.67	296.58	6.8%	260.48	287.92	10.5%
Best Estimate	277.67	305.81	10.1%	260.48	297.15	14.1%
Pessimistic	277.67	315.43	13.6%	260.48	306.77	17.8%

Plan Prime - Family

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	568.84	607.14	6.7%	484.94	589.54	11.1%
Best Estimate	568.84	626.15	10.1%	484.94	608.55	14.7%
Pessimistic	568.84	646.01	13.6%	484.94	628.41	18.4%

MediPrime - Individual

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	186.36	221.70	19.0%	175.61	217.68	24.0%
Best Estimate	186.36	225.38	20.9%	175.61	221.36	26.1%
Pessimistic	186.36	229.36	23.1%	175.61	225.34	28.3%

MediPrime - Family 1

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	478.26	533.05	11.5%	446.33	520.09	16.5%
Best Estimate	478.26	546.54	14.3%	446.33	533.58	19.5%
Pessimistic	478.26	560.76	17.3%	446.33	547.80	22.7%

MediPrime - Family 2

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	386.15	457.32	18.4%	360.73	449.02	24.5%
Best Estimate	386.15	465.26	20.5%	360.73	456.96	26.7%
Pessimistic	386.15	473.82	22.7%	360.73	465.52	29.0%

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

---

Exhibit III

EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 1999 and Projected 2000 Rates
CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

Plan Prime - Individual

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	279.56	298.43	6.7%	261.18	289.39	10.8%
Best Estimate	279.56	307.76	10.1%	261.18	298.72	14.4%
Pessimistic	279.56	317.48	13.6%	261.18	308.44	18.1%

Plan Prime - Family

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	573.33	611.53	6.7%	531.89	593.06	11.5%
Best Estimate	573.33	630.77	10.0%	531.89	612.30	15.1%
Pessimistic	573.33	650.87	13.5%	531.89	632.40	18.9%

MediPrime - Individual

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	186.46	221.48	19.0%	175.61	217.77	24.0%
Best Estimate	186.46	225.48	20.9%	175.61	221.45	26.1%
Pessimistic	186.46	229.47	23.1%	175.61	225.44	28.4%

MediPrime - Family 1

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	480.95	535.68	11.4%	447.05	522.21	16.8%
Best Estimate	480.95	549.31	14.2%	447.05	535.84	19.9%
Pessimistic	480.95	563.68	17.2%	447.05	550.21	23.1%

MediPrime - Family 2

	Gross Rates(1) 1999	Gross Rates(1) 2000	Gross Rates(1) % Change	Net Rates(2) 1999	Net Rates(2) 2000	Net Rates(2) % Change
Optimistic	387.05	458.20	18.4%	360.66	449.75	24.7%
Best Estimate	387.05	466.18	20.4%	360.66	457.73	26.9%
Pessimistic	387.05	474.79	22.7%	360.66	466.34	29.3%

(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
Core Plus Medical & Psychiatric Enhancement

Individual

Year	Gross Rate	% Changes	Net Rate	% Change
1985*	95.71		92.85
1986	91.97	-3.9%	91.49	-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%
2000 (projected)	269.27	12.6%	262.06	18.0%

Individual Average Percent Increase

	Gross Rate % Changes	Net Rate % Change
From Inception	7.6%	7.7%
Most Recent 10 Years	4.3%	4.8%
Most Recent 5 Years	4.7%	6.4%

 

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	539.14	4.8%	499.75	7.8%
2000 (projected)	602.17	11.7%	585.77	17.2%

Family Average Percent Increase

	Gross Rate % Changes	Net Rate % Change
From Inception	8.1%	8.1%
Most Recent 10 Years	4.2%	4.6%
Most Recent 5 Years	4.4%	6.1%

* 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 rate schedule effective 1/1/96.

---

Exhibit IV

EMPIRE PLAN
PA 5 TIER GROUP RATES
1995-2000 Monthly Rates
Core Plus Medical & Psychiatric Enhancement

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	279.56	4.4%	261.18	6.1%
2000 (projected)	307.76	10.1%	298.72	14.4%

Individual Planprime Average Percent Increase