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.
ANDREW M. CUOMO
GOVERNOR
DEPARTMENT OF CIVIL SERVICE
ALBANY, NEW YORK 12239
www.cs.ny.gov
JERRY BOONE
COMMISSIONER
PE14-22
TO: Participating Employer Chief Executive Officers & Health Benefit Administrators
FROM: David Boland, Acting Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: July 15, 2014
Attached is the Empire Plan First Quarter Experience Report for 2014. This report presents the 2013 Empire Plan experience, the projected 2014 Empire Plan experience, based on claims paid through March 31, 2014, and the projected 2015 premium rates.
For the 2013 Plan Year, the Empire Plan carriers declared a net surplus of $300.6 million, or 4.5% of premium. The underlying causes for these amounts are discussed in the report.
For the 2014 Plan Year, the Empire Plan vendors project a net loss of $18.0 million, or 0.3% of premium. Historically, experience projections based on three months of paid claim data have been conservative. We expect the projected experience to modestly improve as actual claims materialize.
Exhibit III presents the projected 2015 Empire Plan premium rates. These projections include a tentative dividend application amount of $250 million; $122 million greater than the dividend credit included in the 2014 rates. The projected dividend application for 2015 results in an increase in the projected premium rates charged to payors that is modestly lower than the increase in the projected gross premium rates.
The “best estimate” projected net premium increase for 2015 is 5.4% in aggregate for The Empire Plan. These projections are based on a number of assumptions made by the vendors 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 ongoing fiscal challenges faced by the State and the participating employers, our continuing goal is to achieve 2015 NYSHIP rates that are as low as possible while promoting rate stability into the future. The rate development and related proceedings 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.
EMPIRE PLAN EXPERIENCE REPORT
FIRST QUARTER 2014
Produced for
PARTICIPATING EMPLOYERS IN THE
NEW YORK STATE
HEALTH INSURANCE PROGRAM
by
The Employee Benefits Division
New York State Department of Civil Service
Actual 2013 Empire Plan Experience
Projected 2014 Empire Plan Experience
Projected 2015 Premium Rates
Exhibits
I. 2013 Empire Plan Experience
II. Projected 2014 Empire Plan Experience
III. Projected 2015 Empire Plan Premium Rates
IV. Monthly Rate History (2006-2015)
ACTUAL 2013 EMPIRE PLAN EXPERIENCE
As presented in Exhibit I, the Empire Plan vendors declared an aggregate surplus of $300.6 million (4.5% of premium), which is nearly identical to the surplus projected in the 2013 Fourth Quarter Report.
There was an overall improvement of $445.9 million in the 2013 experience from the level projected at the time the premiums were developed. The substantial improvement in experience is primarily attributable to a decrease in the projected 2013 claim base and a reduction in the 2013 trend estimates as anticipated by the State and its benefit consultant. Other contributing factors include an increase in pharma revenue receipts and Employer Group Waiver Plan (EGWP) subsidies from the implementation of the Empire Plan Medicare Rx plan in 2013 and $80 million in premium tax savings associated with the conversion of the Medical Program contract to a self-insured arrangement effective January 1, 2013.
PROJECTED 2014 EMPIRE PLAN EXPERIENCE
The Empire Plan vendors project a net loss of $18.0 million (0.3% of premium) for 2014, as presented in Exhibit II. This projection is based on three months of 2014 paid claim data. The following chart presents the percentage of the projected incurred claims actually paid, as well as the most recent projected 2014 trend as compared to the trend assumed during the 2014 premium rate development:
|
|
% of Paid Claims to Projected Incurred Claims |
Projected 2014 Trend | ||
|---|---|---|---|---|
|
|
2013 |
2014 |
@ Final Renewal |
@ 2014 1st Quarter |
|
Blue Cross Hospital |
97.9% | 14.4% | 7.1% | 7.4% |
|
UHC Medical |
98.9% | 16.1% | 6.0% | 5.9% |
|
MHSA |
94.9% | 8.1% | 7.4% | 7.4% |
|
Rx |
99.9% | 24.8% | 5.5% | 5.5% |
Effective January 1, 2014 the Empire Plan and Excelsior Plan are fully self-funded plans and as a result the Department developed the rates based on incurred claim amounts projected by the vendors as well as by the Department’s benefits consultant, Aon Hewitt. Furthermore, the premium rates established for the 2014 plan year did not include any margin. The projected surplus as compared to the margin level included in the 2014 premium is as follows:
|
|
Margin |
Projected 2014 |
Projected Experience Change |
|---|---|---|---|
|
Blue Cross Hospital |
$0 |
($50.8) |
($50.8) |
|
UHC Medical |
$0 |
($29.8) |
($29.8) |
|
Value Options MHSA |
$0 |
$3.2 |
$3.2 |
|
CVS Caremark Rx |
$0 |
$59.4 |
$59.4 |
|
Total |
$0 |
( $18.0) |
($18.0) |
(In millions)
The overall projected 2014 experience has decreased by $18.0 million from the projections made at the time the premium was developed. The projected loss is primarily attributable to an increase in the 2013 claim base projected for the Hospital and Medical Programs as compared to the projections used in developing the 2014 premium rates. The projected loss is offset, in part, by improvement in the observed Prescription Drug and Mental Health and Substance Program 2014 claims experience. The Department remains confident that the final 2014 plan year experience will be comparable to the premium charged participants.
2015 PROJECTED PREMIUM RATES
The development of the 2015 premium rates will once again be challenging as a result of the Empire Plan becoming fully self-funded effective January 1, 2014. Similar to 2014, premium rates will be developed by the Department with assistance from the Department’s benefits consultant and the contractors administering the Plan’s programs. Empire Plan vendor rate recommendations for 2015 are required to be submitted to the Department by September 1st. Our continuing goal is to achieve the lowest rates possible while maintaining rate stability for the coming years. Taking these changes into account, the projected increase in the 2015 Empire Plan net premium as presented in Exhibit III is 5.4%. The underlying assumptions/factors contributing to this increase include:
- 2014 premium rates that are expected to result in a marginal dividend.
- 2015 projected trend of 6.0%.
- Transitional Reinsurance Fee mandated by the Affordable Care Act is projected to decrease from $54 million in 2014 to $38 million in 2015.
- Increased application of federal and manufacturer subsidies received under the Employer Group Waiver Plan.
While a $443.0 million surplus is anticipated to be available on December 31, 2014, the projected 2015 premium rates include the tentative use of $250.0 million in dividend or $122.0 million more than the dividend credit included in the 2014 rates. The remaining dividend balance will be used to provide stability to future year’s rate increases. The actual amount of dividend to be applied in the 2015 premium rates will be determined in October 2014 when the new rates are established.
Exhibit IV presents The Empire Plan individual and family rate history since 2006 for groups with and without drug coverage.