GOVERNOR
DEPARTMENT OF CIVIL SERVICE
ALBANY, NEW YORK 12239
www.cs.ny.gov
COMMISSIONER
DANIEL E. WALL
EXECUTIVE
DEPUTY COMISSIONER
PE98-02
TO: Participating Employer Health Benefits Administrators
FROM: Robert DuBois, Director, Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: January 14, 1998
Attached is the Participating Employer Third Quarter Report for 1997. This report provides projected 1997 experience based on claims paid through September 1997, and 1998 premium rates.
The Empire Plan carriers are projecting a surplus for 1997 of $90.1 million, 5.2% of premium. A review of the projected annual experience of each of the carriers is included in the report. The 1998 premium rates are 4.6% (gross) and 1.8% (net) higher than the 1997 rates.
I hope this report is both informative and useful to you. Please don't hesitate to contact me if you have any questions, comments or suggestions.
PARTICIPATING EMPLOYERS
EMPIRE PLAN
1997 Third Quarter
Experience Report
Prepared by The State of New York Department of Civil Service
NYS HEALTH INSURANCE PROGRAM
PARTICIPATING EMPLOYER GROUP
EMPIRE PLAN EXPERIENCE REPORT
3RD QUARTER REPORT
PROJECTED 1997 EMPIRE PLAN EXPERIENCE
Based on claims paid through September, 1997, the Empire Plan carriers project a composite surplus of $90.1 million or 5.2% of premium. This represents an increase of $39.2 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 $30.6 million or 5.4% of premium, which is $13.1 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 $33.3 million or 4.4% of premium representing an $11.1 million increase over the margin loaded in the 1997 rates. This dividend increase is due to the overestimation of the Health Care Reform Act (HCRA) charge from the amount projected at the time the 1997 rates were developed, partially offset by an understatement of the Open and Unreported Claims Reserve as of 12/31/96.
UnitedHealthcare Mental Health and Substance Abuse Program
UnitedHealthcare projects a 1997 surplus of $19.3 million or 19.0% of premium for the Mental Health and Substance Abuse (MHSA) Program. The additional $16.8 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 previously estimated.
Cigna
A 1997 dividend of $7.0 million or 2.2% of premium is estimated by Cigna. This represents a $1.7 million decrease over the margin loaded in the 1997 rates and is primarily attributable to a moderate upturn in trend partially offset by more favorable interest credits received on the dedicated cash account.
1998 PREMIUM RATES
Exhibit II presents the 1998 Empire Plan gross and net rates in comparison to the 1997 rates. The 1998 net rates reflect the application of $154.3 million in dividend to all payors. Empire Plan gross premium will increase approximately 4.6% with a net premium increase of 1.8%. The smaller rate of increase in net premium in relation to the increase in the gross premium, results from the larger amount of dividend applied in the 1998 rates.
The underlying trend assumptions used by the carriers for the 1998 Participating Employer Rates are as follows:
| Component | Trend |
|---|---|
| Blue Cross | 2.6% |
| UnitedHealthcare (UHC) Core | 4.8% |
| UnitedHealthcare Medical Enhancement | 7.3% |
| UnitedHealthcare MHSA Core | 0.0% |
| UnitedHealthcare MHSA Enhancement | 0.0% |
| Cigna | 14.5% |
| Composite | 5.6% |
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.
Exhibit Ill presents the individual and family rate history for the groups with and without drug coverage since the inception of the Empire Plan.
1997 PROJECTED EMPIRE PLAN EXPERIENCE
In (000's)
|
| BLUE CROSS | UnitedHealthcare MEDICAL - Core | UnitedHealthcare MEDICAL - NY Enhancement | UnitedHealthcare MEDICAL - PA Enhancement | UnitedHealthcare MEDICAL - Combined | GHI MHSA - Core | GHI MHSA - NY Enhancement | GHI MHSA - PA Enhancement | GHI MHSA - Combined | CIGNA | TOTAL |
|---|---|---|---|---|---|---|---|---|---|---|---|
| A Premium (1) | 563,377 | 593,300 | 83,400 | 76,300 | 753,00 | 82,400 | 10,400 | 8,500 | 101,300 | 312,376 | 1,730,053 |
| B Incurred Claims (2) | 501,141 | 518,871 | 68,985 | 56,045 | 643,901 | 53,416 | 6,431 | 5,025 | 64,872 | 292,097 | 1,502,011 |
| C Administrative Expense (3) | 31,685 | 60,957 | 7,957 | 6,912 | 75,826 | 13,973 | 1,737 | 1,424 | 17,134 | 13,313 | 137,958 |
| D Gain/(Loss) (A-B-C) | 30,551 | 13,472 | 6,458 | 13,343 | 33,273 | 15,011 | 2,232 | 2,051 | 19,294 | 6,966 | 90,084 |
(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.
(4) Excludes the impact of any increase in the Disabled Lives Liability.
Source: 1997 3rd Quarter Report.
EMPIRE PLAN
Participating Employer Premium Rates
Comparison of 1997 and 1998 Rates
EMPIRE PLAN OPTION WITH DRUGS
| | 1997 Gross Rates | 1998 Gross Rates | % Change | 1997 Net Rates | 1998 Net Rates | % Change |
|---|---|---|---|---|---|---|
| Individual | 210.14 | 219.80 | 4.6% | 195.84 | 198.03 | 1.1% |
| Family | 475.82 | 500.46 | 5.2% | 443.20 | 453.17 | 2.2% |
EMPIRE PLAN OPTION WITHOUT DRUGS
| | 1997 Gross Rates | 1998 Gross Rates | % Change | 1997 Net Rates | 1998 Net Rates | % Change |
|---|---|---|---|---|---|---|
| Individual | 163.69 | 166.60 | 1.8% | 150.93 | 150.75 | -0.1% |
| Family | 383.90 | 395.19 | 2.9% | 354.31 | 359.61 | 15% |
PARTICIPATING EMPLOYER RATES
1985-1998 MONTHLY RATES
REPRESENTS ENROLLEES WITH RX DRUG COVERAGE
Individual
| Year | Gross Rate | % Changes | Net Rate | % Change |
|---|---|---|---|---|
| 1985 | 95.71 | 92.85 | ||
| 1986 | 91.14 | -4.8% | 90.66 | -2.4% |
| 1987 | 102.12 | 12.0% | 100.63 | 11.0% |
| 1988 (1) | 141.85 | 38.9% | 141.36 | 40.5% |
| 1989 | 161.80 | 14.1% | 161.17 | 14.0% |
| 1990 | 172.64 | 6.7% | 161.17 | 0.0% |
| 1991 (2) | 192.58 | 11.6% | 178.07 | 10.5% |
| 1992 | 187.15 | -2.8% | 176.16 | -1.1% |
| 1993 | 198.98 | 6.3% | 181.76 | 3.2% |
| 1994 | 203.40 | 2.2% | 182.14 | 0.2% |
| 1995 | 203.06 | -0.2% | 181.51 | -0.3% |
| 1996 | 221.45 | 9.1% | 198.12 | 9.2% |
| 1997 | 210.14 | -5.1% | 195.84 | -1.2% |
| 1998 | 219.80 | 4.6% | 198.03 | 1.1% |
Individual Average Percent Increase
| | Gross Rate % Changes | Net Rate % Change |
|---|---|---|
| From Inception | 7.1% | 6.5% |
| Most Recent 10 Years | 4.6% | 3.6% |
| Most Recent 5 Years | 2.1% | 1.8% |
Family
| Year | Gross Rate | % Changes | Net Rate | % Change |
|---|---|---|---|---|
| 1985 | 203.97 | 197.57 | ||
| 1986 | 193.53 | -5.1% | 192.52 | -2.6% |
| 1987 | 220.20 | 13.8% | 217.02 | 12.7% |
| 1988 (1) | 322.80 | 46.6% | 321.74 | 48.3% |
| 1989 | 366.63 | 13.6% | 365.25 | 13.5% |
| 1990 | 397.82 | 8.5% | 365.25 | 0.0% |
| 1991 (2) | 438.18 | 10.1% | 409.08 | 12.0% |
| 1992 | 419.36 | -4.3% | 394.57 | -3.5% |
| 1993 | 445.27 | 6.2% | 405.64 | 2.8% |
| 1994 | 461.43 | 3.6% | 411.61 | 1.5% |
| 1995 | 461.35 | 0.0% | 413.78 | 0.5% |
| 1996 | 496.62 | 7.6% | 441.65 | 6.7% |
| 1997 | 475.82 | -4.2% | 443.20 | 0.4% |
| 1998 | 500.46 | 5.2% | 453.17 | 2.2% |
Family Average Percent Increase
| | Gross Rate % Changes | Net Rate % Change |
|---|---|---|
| From Inception | 7.8% | 7.3% |
| Most Recent 10 Years | 4.6% | 3.6% |
| Most Recent 5 Years | 2.4% | 2.3% |
(1) Represents the effective amounts of the 1/88 and the 8/88 rate changes.
(2) Represents 1/1/91 - 6/30/91 rates
PARTICIPATING EMPLOYER RATES
1985-1998 MONTHLY RATES
REPRESENTS ENROLLEES WITHOUT RX DRUG COVERAGE
Individual
| Year | Gross Rate | % Changes | Net Rate | % Change |
|---|---|---|---|---|
| 1985 | 79.41 | 76.66 | ||
| 1986 | 75.58 | -4.8% | 75.18 | -1.9% |
| 1987 | 86.96 | 15.1% | 86.51 | 15.1% |
| 1988 (1) | 119.93 | 37.9% | 119.51 | 38.1% |
| 1989 | 134.90 | 12.5% | 134.48 | 12.5% |
| 1990 | 139.64 | 3.5% | 134.48 | 0.0% |
| 1991 (2) | 155.20 | 11.1% | 134.27 | -0.2% |
| 1992 | 153.72 | -1.0% | 144.58 | 7.7% |
| 1993 | 159.11 | 3.5% | 144.70 | 0.1% |
| 1994 | 165.78 | 4.2% | 145.50 | 0.6% |
| 1995 | 161.92 | -2.3% | 143.60 | -1.3% |
| 1996 | 175.00 | 8.1% | 152.84 | 6.4% |
| 1997 | 163.69 | -6.5% | 150.93 | -1.2% |
| 1998 | 166.60 | 1.8% | 150.75 | -0.1% |
Individual Average Percent Increase
| | Gross Rate % Changes | Net Rate % Change |
|---|---|---|
| From Inception | 6.4% | 5.8% |
| Most Recent 10 Years | 3.5% | 2.4% |
| Most Recent 5 Years | 1.1% | 0.9% |
Family
| Year | Gross Rate | % Changes | Net Rate | % Change |
|---|---|---|---|---|
| 1985 | 171.40 | 165.23 | ||
| 1986 | 162.84 | -5.0% | 161.99 | -2.0% |
| 1987 | 187.84 | 15.4% | 186.96 | 15.4% |
| 1988 (1) | 281.15 | 49.7% | 280.25 | 49.9% |
| 1989 | 312.81 | 11.3% | 311.82 | 11.3% |
| 1990 | 336.03 | 7.4% | 311.82 | 0.0% |
| 1991 (2) | 369.99 | 10.1% | 332.62 | 6.7% |
| 1992 | 356.29 | -3.7% | 334.96 | 0.7% |
| 1993 | 368.84 | 3.5% | 334.48 | -0.1% |
| 1994 | 387.97 | 5.2% | 339.99 | 1.6% |
| 1995 | 379.92 | -2.1% | 338.53 | -0.4% |
| 1996 | 404.70 | 6.5% | 351.99 | 4.0% |
| 1997 | 383.90 | -5.1% | 354.31 | 0.7% |
| 1998 | 395.19 | 2.9% | 359.61 | 1.5% |
Family Average Percent Increase
| | Gross Rate % Changes | Net Rate % Change |
|---|---|---|
| From Inception | 7-4% | 6.9% |
| Most Recent 10 Years | 3.6% | 2.6% |
| Most Recent 5 Years | 1.5% | 1.5% |
(1) Represents the effective amounts of the 1/88 and the 8/88 rate changes.
(2) Represents 1/1/91 - 6/30/91 rates