Department of Civil Service

PE13-10

TO: Participating Agency Chief Executive Officers & Health Benefit Administrators
FROM: Robert W. DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: July 28, 2013

Attached is the Empire Plan First Quarter Experience Report for 2013. This report presents the projected 2013 Empire Plan experience and the projected 2014 premium rates.

For the 2013 Plan Year, the Empire Plan carriers project a net surplus of $93.2 million, 1.39% of premium. Historically, experience projections based on three months of paid claim data have been conservative. We expect the projected surplus to increase as actual claims materialize.

Exhibit II presents the projected 2014 Empire Plan premium rates. These projections include a tentative dividend application amount of $225.6 million; $85.6 million greater than the dividend credit included in the 2013 rates. In addition, the 2014 premium rates include the tentative use of $27.9 million in funds received from the Early Retirement Reinsurance Program (ERRP); the 2013 premium rates did not include any ERRP credits. The increase in the dividend and the ERRP credits result in an increase in the projected premium rates charged to payors that is modestly lower than the increase in the projected premium rates charged by the insurance carriers/vendors.

The "best estimate" projected net premium increase for 2014 is 5.0% in aggregate for The Empire Plan. These projections are based on a number of assumptions made by the carriers and the Department of Civil Service. Historically, the actual increase in the premium has been less than the increase in premium projected in the 1st Quarter Reports; however, these projections include a degree of optimism not previously reflected in prior 1st Quarter Reports.

Given the fiscal challenges that the State and the participating employers continue to face, our goal is to achieve 2014 NYSHIP rates that are as low as possible while promoting rate stability for the near future. The rate development and carrier negotiations will begin in September.

I hope this report is informative. If you have any questions, comments or suggestions, please don't hesitate to contact the Financial Management Unit at (518) 402-4739.

PARTICIPATING EMPLOYERS

Prepared by the State of New York
Department of Civil Service 

EMPIRE PLAN EXPERIENCE REPORT

FIRST QUARTER 2013

Produced for

PARTICIPATING EMPLOYERS IN THE
NEW YORK STATE
HEALTH INSURANCE PROGRAM

by

The Employee Benefits Division
New York State Department of Civil Service

• Projected 2013 Empire Plan Experience
• Projected 2014 Premium Rates.

EXHIBITS

1. Projected 2013 Empire Plan Experience
2. Projected 2014 Empire Plan Premium Rates
3. Monthly Rate History (2005-2014)

NYSHIP News Section

NEW YORK STATE HEALTH INSURANCE PROGRAM
PARTICIPATING EMPLOYER GROUP
EMPIRE PLAN EXPERIENCE REPORT
1ST QUARTER REPORT

PROJECTED 2013 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project an aggregate surplus of $93.2 million (1.39% of premium) for 2013, as presented in Exhibit I. This projection is based on three months of 2013 paid claim data. The following chart presents the percentage of the projected incurred claims actually paid, as well as the most recent projected 2013 trend as compared to the trend assumed during the 2013 premium rate development:

For 2013, the carriers agreed to remove the margin from the premium rates. Also, based on the size of the projected 2012 dividend that was being generated and the continued underlying carrier conservatism, the State requested additional premium reductions totaling $142.3 million from the 2013 premium rates. In return for the reductions in the carrier premium requests, retrospective premium agreements totaling $403.7 million were necessary. The projected 2013 surplus by each carrier as compared to the margin level and premium reductions factored in the 2013 premium are as follows:

In mIllions

The overall 2013 experience has improved $235.5 million from the carrier projections made at the time the premium was developed. The primary causes for the substantial improvement in the projected experience is attributable to the decrease in the projected 2012 claim base since the premium was developed and the reduction in the 2013 trend estimates as anticipated by the State and its benefit consultant. In addition, since the 2013 rates were implemented, the medical contract was converted to a self-insured arrangement resulting in an $80 million improvement in the experience due to reduced premium taxes.

2014 PROJECTED PREMIUM RATES

The development of the 2014 premium rates will be more challenging because the Prescription Drug contract and Mental Health and Substance Abuse contract will become self-funded effective 1/1/2014. For these contracts, "premium equivalent rates" will be developed by the Department with assistance from the Department's benefit consultant and the contactors administering the Plan's programs. While NYS premium taxes are not assessed on these self-insured contracts, new federal fees/assessments as stipulated under the Affordable Health Act are applicable; however, the impact of the fees/assessments will be reduced due to the conversion of three of the four contracts to self-insurance.

Taking these changes into account, the projected increase in the 2014 Empire Plan net premium as presented in Exhibit II is 5.0%. The underlying assumptions/factors contributing to this increase include:

• Improvement in the 2013 claim base since the 2013 premium development.
• 2014 projected trend of 7.0%.
• Removal of NYS taxes and assessments on the Prescription Drug and MHSA contracts.
• New federal fees (Insurer Fee and Reinsurance Fees).
• Improved pricing on the new Prescription Drug contract effective 1/1/14.
• Lag in federal and manufacturer revenues received under the Employer Group Waiver Plan.

While $282.8 million in dividend is anticipated to be available on 12/31/2013, the projected 2014 premium rates include the tentative use of $225.6 million in dividend or $85.6 million more than the dividend credited in the 2013 rates. In addition, the projected 2014 premium rates include the tentative use of $27.9 million in monies received from the Early Retirement Reinsurance Program (ERRP); the 2013 premium rates did not include any ERRP credits. The actual amount of dividend and ERRP monies to be applied in the 2014 premium rates will be determined in October 2013 with the balance of the dividends set aside to fund potential retrospective premium payments for 2014 or to provide stability to future year's rate increases.

Exhibit III presents The Empire Plan individual and family rate history since 2005 for groups with and without drug coverage.

Exhibit I

2013 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 other retention.
Source: Carriers 2013 1st Quarter Experience Report

Exhibit II

2014 Premium Projections

Empire Plan With Drug Coverage

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

2014 Premium Projections

Empire Plan Without Drug Coverage

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

Exhibit III

PARTICIPATING EMPLOYER RATES
2005-2014 MONTHLY RATES

REPRESENTS ENROLLEES WITH RX DRUG COVERAGE

REPRESENTS ENROLLEES WITHOUT RX DRUG COVERAGE

First Quarter Report - 2013

Federal Health Care Reform

Guidance on Marketplace Notice Requirements: The Employee Benefits Division is currently working on a guidance memo to assist Participating Agencies and Participating Employers on Marketplace Notice requirements. The Patient Protection and Affordable Care Act (PPACA) requires all employers to provide employees a Marketplace Notice detailing the existence of the healthcare coverage Marketplace (referred to as "Exchanges" in the law), its function, and the potential advantages it holds for employees. This notice must be provided to new hires and current employees starting October 1, 2013. The memo aims to detail and clarify specific requirements for the notice, thus ensuring all Participating Agencies and Participating Employers are acting within the requisites of the law.

Employer Shared Responsibility Requirements: On July 2, the Obama Administration announced that the Employer Shared Responsibility Requirements and Employer Shared Responsibility Penalty provisions of the Affordable Care Act will be delayed until 2015. The shared responsibility requirement, a crucial provision of the Patient Protection and Affordable Care Act (PPACA) was previously set to take effect January 1, 2014. NYSHIP is currently awaiting further direction from the Administration on this issue before providing information to Participating Employers.

Employee Benefits Division staff continues to review and monitor updates and clarifications related to Federal Healthcare Reform and its numerous provisions which NYSHIP will be required to implement in the future. We will continue to provide information as it becomes available.

Empire Plan Medicare Rx Update

Effective January 1, 2013, nearly 240,000 Medicare primary enrollees and dependents were successfully enrolled in Empire Plan Medicare Rx, a Medicare Part D prescription drug program. However a small percentage of that population was unable to be enrolled due to either incorrect or incomplete information in their NYSHIP enrollment record or enrollment in another Medicare Part D plan. As explained to enrollees in Empire Plan Medicare Rx plan materials over the past several months, enrollment in Empire Plan Medicare Rx is required to maintain Empire Plan coverage. The Department has moved forward with the cancellations that apply to Empire Plan Medicare-primary enrollees and dependents who are not enrolled in Empire Plan Medicare Rx. Prior to processing any cancellations the Employee Benefits Division will mail letters to notify each recipient of the upcoming cancellation of his/her NYSHIP Empire Plan coverage and give instructions regarding steps to take to avoid cancellation. Cancellations that have been processed will appear on the transaction listings provided to agency Health Benefit Administrators.

Procurement Updates/Self-Funding

CVS/Caremark was the awarded a five year contract for the Empire Plan Prescription Drug Program with an effective date of January 1, 2014. Under the new contract the program will be administered on a self-funded basis. Empire Plan Medicare Rx will be administered by SilverScript, a CVS/Caremark company.

Due to Medicare requirements, enrollee communications regarding the transition to SilverScript will begin in late summer/early fall of 2013.

On February 15, 2013, the Department released an RFP for the Empire Plan Mental Health and Substance Abuse Program for a five year contract to be administered on a self-funded basis effective January 1, 2014.

East End Health Alliance Update

Empire BlueCross BlueShield (EBCBS), the insurer for the hospital component of the Empire Plan, has reached contract agreement with the East End Health Alliance (EEHA).  Since the new contract is retroactive to April 1, 2013, the facilities in the EEHA group remained in the EBCBS network. EEHA is comprised of three hospitals on the eastern end of Long Island (Suffolk County):  Southampton Hospital, Peconic Bay Medical Center and Eastern Long Island Hospital.

UnitedHealthcare (UHC) Options PPO
Effective June 1, 2013, medical providers in the UnitedHealthcare (UHC) Options PPO network in the states of Maryland, Virginia, and West Virginia will be Empire Plan participating providers. Letters will be sent to active enrollees and retirees who live in these states and the District of Columbia to inform them of the network expansion. The total number of providers that will be added to the network is approximately 34,000. Enrollees may search for participating providers in these states online via the Department web site at: https://www.cs.ny.gov/ebd, starting June 1, 2013, or, they can call The Empire Plan toll-free at: 1-877-7-NYSHIP (1-877-769-7447) and choose the Medical Program. A printed directory will be available later this year and a reference copy will be mailed to HBAs. Additional copies will be available to order on HBA Online.

Employer Experience Reports

Employer specific Empire Plan financial experience reports are available from the Employee Benefits Division upon request. These reports are calendar year based and provide aggregate data broken down by Plan component - hospital, medical/surgical, mental health/substance abuse and prescription drug. To obtain a financial experience report, PEs may submit an official written request on employer letterhead indicating the calendar years for which reports are desired. The request may be directed to the Employee Benefits Division - Director's Office.

GASB 45 Assumptions Report and Census Data

The 2012 Buck Consultants report Development of Recommended Actuarial Assumptions for New York State/SUNY GASB Valuation - Participating Employer Version is available online at: http://www.cs.ny.gov/GASB/2012PEReport.pdf.

NYSHIP will provide census reports upon request, for use in complying with the provisions of GASB 45. Since the data included in these reports will be current at the time they are provided, it is important that an employer's NYBEAS file is up-to-date, including correctly identifying and coding retirees before requesting census data.

To request a copy of your agency's census data, please send an e-mail to: MaryEllen.Brucculeri@cs.state.ny.us and include your name, agency name & code number, mailing address, phone number and e-mail address, please call (518) 485-1771. For additional information about GASB 45, please refer to Memos PE06-11 and PE06-21.

Prompt Payment of NYSHIP Premium

The Employee Benefits Division continues to aggressively monitor employers that fail to submit premium payments in a timely manner. This procedure includes suspension of claims for enrollees of any employer that falls three months behind in premium. To avoid disruption of NYSHIP coverage, employers must ensure submission of premium payments by the due date, as we must submit premium to the NYSHIP insurers on time. Employers may wish to consider submitting payments electronically to promote timely payments.

Availability of Reports Electronically

The Empire Plan Experience Reports are available through the following link to our website: http://www.cs.ny.gov/employee-benefits/pa-market/financial-reports.cfm.

CEO, CFO & HBA Name and Address Changes

Employers must notify the Employee Benefits Division of any changes in the names and/or addresses (including e-mail addresses) of CEOs, CFOs and/or HBAs to ensure that our mailing and contact lists are up-to-date. Any updates should be e-mailed to Deborah.DOrazio@cs.state.ny.us.