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

PA01-02

TO: Participating Agency Health Benefits Administrators
FROM: The Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: February 26, 2001

Enclosed are the Fourth Quarter Empire Plan Experience Report for 2000 and the cover letter to the Chief Executive Officers.

This report provides projected year 2000 experience and projected premium rates for the year 2001.

February 26, 2001

Dear Chief Executive Officer:

Attached is the Participating Agency Fourth Quarter Report for 2000. This report provides projected 2000 Empire Plan experience based on claims paid through December 31, 2000 and projected premium rates for 2002.

The Empire Plan carriers are projecting a combined year 2000 surplus of $97.9 million, 4.2% of premium. The report explains the basis for these projections.

The projected premium rates for 2002 are included in Exhibit II. These initial projections reflect increases in the gross and net premiums of approximately 11.4% and 12.5%, respectively. Please note that these are preliminary projections which have been made without any claims experience for 2001. The report explains the basis for these projections and future reports will include revisions based on actual experience. Please read the "Keeping You Informed" section of this report for information on our plans to distribute the Participating Agency Benefit Statements.

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
2000 FOURTH QUARTER
EXPERIENCE REPORT

OCTOBER - DECEMBER 2000

Produced for

PARTICIPATING AGENCIES IN THE

NEW YORK STATE

HEALTH INSURANCE PROGRAM

the Employee Benefits Division

New York State Department of Civil Service

George C. Sinnott

President, New York State Civil Service Commission

Projected 2000 Empire Plan Experience
2002 Projected Premium Rates
Keeping You Informed
Attachment 1 — Transmission of Reports Electronically

Exhibits

I 2000 Projected Empire Plan Experience

II Projected Empire Plan PA 2002 Premium Rates

III Empire Plan PA Group Rates 1985-2002

IV Empire Plan PA 5 Tier Group Rates 1995-2002

NYS HEALTH INSURANCE PROGRAM

PARTICIPATING AGENCY GROUP

EMPIRE PLAN EXPERIENCE REPORT

4TH QUARTER REPORT

PROJECTED 2000 EMPIRE PLAN EXPERIENCE

Based on claims paid through December 31, 2000, the Empire Plan carriers project a composite dividend of $97.9 million (4.2% of premium), or $39.7 million more than the margin loaded in the 2000 rates. The 2000 annual experience projected by the insurance carriers is reported in Exhibit I.

This modestly higher projected dividend in comparison to the margin load is primarily the blended result of lower projected claims under both the Blue Cross and Cigna components. The changes to these carrier projections for the most part relate to the 1999 claim base projected at the time the 2000 rates were developed. While the 1999 claim base is lower, the trend factors on all benefit components are rising. For Plan Year 2001, the aggregate trend factor projected by the carriers is 13.1%.

Though Cigna's surplus projection is $51.9 million, such amount must first be used to offset the 1999 loss of $39.8 million and results in a projected dividend of $12.1 million. While loss recovery was envisioned, it occurred sooner than expected. The lower claims experience is attributable to utilization and mix savings resulting from the change in the copay amounts effective 1/1/2000. Though these savings benefit the current and future experience, we must note that the trend factor developed by the carrier is 24% and reflects the increasing costs of prescription drugs.

2002 PROJECTED PREMIUM RATES

Exhibit II presents projected 2002 Empire Plan gross and net premium rates, assuming the application of $57.4 million in dividend to all payors. In the aggregate, the Empire Plan gross premium is projected to increase approximately 11.4% while the net premium is projected to increase 12.5%.

Historically, the rate projections provided in the Quarterly Report were based on carrier projections. Since the projections made by the carriers for this report were viewed to be excessively conservative (range of 13.3% to 20.7% with a best estimate of 16.7%), the Department of Civil Service with the advice of Buck Consultants made reasonable adjustments to the carrier projections. As a result, the projected rates in this report reflect a range of 10.2% to 16.5% with a best estimate of 12.5%. Since such projections are not based on any 2001 claim data, each agency must assess its level of comfort in using them.

For comparison purposes, Exhibit III 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 2002.

KEEPING YOU INFORMED

Participating Agency Benefit Statements

Empire Plan Benefit Statements will be distributed to Participating Agency enrollees' homes in Spring 2001. This statement will enable enrollees to review their official health insurance enrollment record at the Employee Benefits Division and will instruct them to notify their agency Health Benefits Administrator of any necessary additions, changes or deletions to their record. Prior to this distribution, we will send agency Health Benefit Administrator's detailed information about this project.

Transmission of Reports Electronically

The Employee Benefits Division 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 a 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 Adobe Systems, Inc., at http://www.adobe.com.

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 1 and returning it to the Employee Benefits Division.

NYSHIP Representation at Municipal Events

NYSHIP's Empire Plan will be represented at the following municipal events:

The 2001 Legislative Conference sponsored by the NYS Association of Counties on February 11-13, 2001, in Albany, NY.
The 2001 Training School and Albany Annual Meeting sponsored by the Association of Towns of the State of New York on February 18-21, 2001, in New York City, NY.
The Winter Legislative Meeting sponsored by the NYS Conference of Mayors and Municipal Officials on February 25-26, 2001, in Albany, NY.
The 2001 Annual Conference sponsored by the NYS Government Finance Officers' Association on March 28-30, 2001, in Albany, NY.

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 Campus, Building #1
Albany, NY 12239

Attachment 1

TRANSMISSION OF REPORTS ELECTRONICALLY

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If you would like to receive the report electronically, please complete this form and return it to:

Mr. Stephen Kavanaugh
Assistant Director
Employee Benefits Division
NYS Department of Civil Service
State Office Campus, Building #1
Albany, NY 12239

Agency Code:

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Exhibit I

2000 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)	689,560	728,393	118,525	80,846	927,764	58,199	6,576	5,551	70,326	626,612	2,314,262
B Incurred Claims (2)	637,742	669,489	88,044	64,034	821,567	42,927	6,748	4,885	54,560	561,037	2,074,906
C Administrative Expense (3)	29,654	70,869	8,946	6,269	86,084	9,959	1,124	951	12,034	13,724	141,496
D Gain/(Loss) (A-B-C)	22,164	(11,965)	21,535	10,543	20,113	5,313	(1,296)	(285)	3,732	51,851	$ 97,860

(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: 2000 4th Quarter Report

Exhibit II