Department of Civil Service

PA02-01

TO: Participating Agency Health Benefit Administrators
FROM: The Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: February 22, 2002

Enclosed are the Fourth Quarter Empire Plan Experience Report for 2001 and the cover letter to the Chief Executive Officers. This report presents the projected 2001 Empire Plan experience as well as projected 2003 premium rates.

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February 22, 2002

Dear Chief Executive Officer:

Attached is the Empire Plan Fourth Quarter Experience Report for 2001. This report presents the projected 2001 Empire Plan experience based on claims paid through December 31, 2001, as well as the projected 2003 premium rates.

The Empire Plan carriers project a 2001 net dividend of $133.9 million, 5.0% of premium. The report explains the basis for this projection. The carriers will issue the 2001 experience statement on March 15, 2002.

The projected 2003 premium rates are presented in Exhibit II and reflect a "best estimated" net increase of 10.5%. The report also presents a range of the potential 2003 rate increase for your budget development considerations.

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

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EMPIRE PLAN
2001 Fourth Quarter
Experience Report

OCTOBER – DECEMBER 2001

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

 

PROJECTED 2001 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $133.9 million (5.0% of premium), or $103.8 million more than the margin loaded in the 2001 rates. The 2001 annual experience projected by the insurance carriers is reported in Exhibit I.

Approximately $42.7 million of the projected surplus is attributable to the better than expected experience of the Prescription Drug Program. While the current dividend projection represents a $5 million reduction from the 3rd Quarter projection, the 2001 experience is still significantly better than the experience projected at rate development. After adjusting for plan and discount pricing changes, the normalized trend, reported by Cigna, is 18.0% or approximately 25% below the pricing trend factor used in the development of the 2001 prescription drug rates.

UnitedHealthcare has projected a $76.1 million dividend, $18.7 million greater than the 3rd quarter projection. This incremental increase is primarily due to a modest reduction in the projected 2001 trend. The majority of the dividend in excess of the margin is attributable to a lower 2000 claim base than what was assumed in the development of the 2001 premium rates.

The projected $5.1 million dividend for the Mental Health and Substance Abuse Program is primarily attributable to the reduction in the actual 2000 claim base in comparison to the amount projected and used in the development of the 2001 premium rates. This improvement was partially offset by the marginally higher trend observed in comparison to the trend factor used in the 2001 rate development.

Empire BlueCross BlueShield is projecting a $10.1 million dividend representing 1.3% of premium. This modest gain, in relation to the marginless premium rate, was primarily attributable to the fact that Empire BlueCross BlueShield did not become a "for profit company" in 2001. As such, tax assessments chargeable to the Plan will be lower than the amount anticipated in the development of the 2001 premium rates.

2003 PROJECTED PREMIUM RATES

Exhibit II presents the projected 2003 Empire Plan gross and net premium rates assuming the application of $111.0 million in dividend to all payors. In the aggregate, the Empire Plan gross premium is projected to increase approximately 11.6% while the net premium is projected to increase 10.5%.

A range of projected gross and net premium rates is also included. While carrier rate projections made at this time of the year have been historically conservative, each agency should assess its budgetary environment in using the enclosed projections.

Exhibit III presents the individual and family rate history for the Core Plus Medical and Psychiatric Enhancements option based on the 5-tier Empire Plan billing rate history in effect since January 1, 1996. Exhibit IV presents, for illustrative purposes only, the 2-tier rate history from 1995 to 2003.

KEEPING YOU INFORMED

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 was/will be represented at the following municipal events:

• The 2002 Legislative Conference sponsored by the NYS Association of Counties on January 27-28, 2002, in Albany, NY.
  
• The 2002 Training School and Annual Meeting sponsored by the Association of Towns of the State of New York on February 17-19, 2002, in New York City.
  
• The 2002 Winter Legislative Conference sponsored by the NYS Conference of Mayors on February 24-25, 2002, in Albany, NY.
  
• The 2002 Annual Conference sponsored by the NYS Government Finance Officers’ Association on March 19-21, 2002, in Albany.

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 B. Kavanaugh
Director
Employee Insurance Programs
Employee Benefits Division
NYS Department of Civil Service
State Office Campus, Building #1
Albany, NY 12239

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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
Director
Employee Insurance Programs
Employee Benefits Division
NYS Department of Civil Service
State Office Campus, Building #1
Albany, NY 12239

 

Agency Code:

Agency Name:

Contact Person:

E-mail Address:

Phone Number:

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Exhibit I

2001 PROJECTED EMPIRE PLAN EXPERIENCE
In (000's)

	EMPIRE 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)	761,924	892,104	105,802	82,015	1,079,921	59,478	8,403	5,843	73,724	741,671	2,657,240
B) Incurred Claims (2)	711,552	764,260	82,929	64,609	911,798	45,961	5,827	3,418	55,206	682,392	2,360,948
C) Administrative Expense (3)	40,291	79,018	7,351	5,669	92,038	10,861	1,534	1,067	13,462	16,557	162,348
D) Gain/(Loss) (A-B-C)	10,081	48,826	15,522	11,737	76,085	2,656	1,042	1,358	5,056	42,722	133,944

(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: 2001 4th Quarter Report

 

Exhibit II

EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 2002 and Projected 2003 Rates
CORE ONLY

Plan Prime: Individual

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	320.42	345.92	8.0%	315.11	336.18	6.7%
Best Estimate	320.42	356.40	11.2%	315.11	346.66	10.0%
Pessimistic	320.42	367.48	14.7%	315.11	357.74	13.5%

Plan Prime: Famly

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	674.55	727.86	7.9%	663.24	707.79	6.7%
Best Estimate	674.55	750.00	11.2%	663.24	729.93	10.1%
Pessimistic	674.55	773.43	14.7%	663.24	753.36	13.6%

MediPrime: Individual

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	249.75	282.80	13.2%	244.60	274.33	12.2%
Best Estimate	249.75	287.87	15.3%	244.60	279.40	14.2%
Pessimistic	249.75	293.22	17.4%	244.60	284.75	16.4%

MediPrime: Family 1

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	603.88	664.74	10.1%	592.72	645.95	9.0%
Best Estimate	603.88	681.46	12.8%	592.72	662.67	11.8%
Pessimistic	603.88	699.17	15.8%	592.72	680.38	14.8%

MediPrime: Family 2

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	533.22	601.62	12.8%	522.22	584.08	11.8%
Best Estimate	533.22	612.93	14.9%	522.22	595.39	14.0%
Pessimistic	533.22	624.90	17.2%	522.22	607.36	16.3%

(1) Represents premiums charged by carriers.
(2) Represents costs charged to participating agencies.

 

EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 2002 and Projected 2003 Rates
CORE PLUS MEDICAL ENHANCEMENT

Plan Prime: Individual

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	352.10	376.32	6.9%	343.04	362.23	5.6%
Best Estimate	352.10	388.40	10.3%	343.04	374.31	9.1%
Pessimistic	352.10	401.08	13.9%	343.04	386.99	12.8%

Plan Prime: Famly

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	738.98	789.70	6.9%	720.19	760.93	5.7%
Best Estimate	738.98	815.09	10.3%	720.19	786.32	9.2%
Pessimistic	738.98	841.78	13.9%	720.19	813.01	12.9%

MediPrime: Individual

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	259.76	292.41	12.6%	253.62	282.63	11.4%
Best Estimate	259.76	297.98	14.7%	253.62	288.20	13.6%
Pessimistic	259.76	303.84	17.0%	253.62	294.06	15.9%

MediPrime: Family 1

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	646.65	705.78	9.1%	630.76	681.32	8.0%
Best Estimate	646.65	724.66	12.1%	630.76	700.20	11.0%
Pessimistic	646.65	744.53	15.1%	630.76	720.07	14.2%

MediPrime: Family 2

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	554.32	621.87	12.2%	541.36	601.71	11.1%
Best Estimate	554.32	634.24	14.4%	541.36	614.08	13.4%
Pessimistic	554.32	647.28	16.8%	541.36	627.12	15.8%

(1) Represents premiums charged by the carriers.
(2) Represents costs charged to participating agencies.

 

EMPIRE PLAN
Participating Agency Premium Rates
Comparison of 2002 and Projected 2003 Rates
CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

Plan Prime: Individual

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	353.81	378.04	6.8%	344.66	363.95	5.6%
Best Estimate	353.81	390.20	10.3%	344.66	376.11	9.1%
Pessimistic	353.81	402.97	13.9%	344.66	388.88	12.8%

Plan Prime: Famly

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	742.98	793.71	6.8%	723.97	764.92	5.7%
Best Estimate	742.98	819.30	10.3%	723.97	790.51	9.2%
Pessimistic	742.98	846.19	13.9%	723.97	817.40	12.9%

MediPrime: Individual

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	259.96	292.61	12.6%	253.82	282.83	11.4%
Best Estimate	259.96	298.19	14.7%	253.82	288.41	13.6%
Pessimistic	259.96	304.06	17.0%	253.82	294.28	15.9%

MediPrime: Family 1

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	649.14	708.27	9.1%	633.13	683.81	8.0%
Best Estimate	649.14	727.28	12.0%	633.13	702.82	11.0%
Pessimistic	649.14	747.27	15.1%	633.13	722.81	14.2%

MediPrime: Family 2

	Gross Rates 2002 (1)	Gross Rates 2003 (1)	Gross Rates % Change (1)	Net Rates 2002 (2)	Net Rates 2003 (2)	Net Rates % Change (2)
Optimistic	555.29	622.85	12.2%	542.29	602.69	11.1%
Best Estimate	555.29	635.26	14.4%	542.29	615.10	13.4%
Pessimistic	555.29	648.35	16.8%	542.29	628.19	15.8%

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

 

Exhibit III

EMPIRE PLAN
PA 5 TIER GROUP RATES
1995 - 2003 Monthly Rates

Core plus Med. & Psych. Enh. - Individual Planprime

	Gross Rate (1)	% Change	Net Rate (2)	% 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	294.94	5.5%	286.53	9.7%
2001	325.23	10.3%	314.26	9.7%
2002	353.81	8.8%	344.66	9.7%
2003 (Projected)	390.20	10.3%	376.11	9.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	7.8%	8.7%

 

Core plus Med. & Psych. Enh. - Family Planprime

	Gross Rate (1)	% Change	Net Rate (2)	% Change
1995	486.99		440.35
1996 (3)	521.96	7.2%	459.16	4.3%
1997	537.96	3.1%	489.22	6.5%
1998	552.00	2.6%	503.78	3.0%
1999	573.33	3.9%	531.89	5.6%
2000	607.33	5.9%	590.16	11.0%
2001	673.67	10.9%	651.09	10.3%
2002	742.80	10.3%	723.97	11.2%
2003 (Projected)	819.30	10.3%	790.51	9.2%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.8%	7.6%

 

Core plus Med. & Psych. Enh. - Individual Medprime

	Gross Rate (1)	% Change	Net Rate (2)	% Change
1995	214.70		193.54
1996 (3)	158.65	-26.1%	131.72	-31.9%
1997	150.53	-5.1%	129.28	-1.9%
1998	167.91	11.5%	151.34	17.1%
1999	186.46	11.0%	175.61	16.0%
2000	217.94	16.9%	214.25	22.0%
2001	245.64	12.7%	239.94	12.0%
2002	259.96	5.8%	253.82	5.8%
2003 (Projected)	298.19	14.7%	288.41	13.6%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.2%	6.6%

 

Core plus Med. & Psych. Enh. - Family - 1 Medprime

	Gross Rate (1)	% Change	Net Rate (2)	% Change
1995	486.99		440.35
1996 (3)	446.03	-8.4%	383.23	-13.0%
1997	427.23	-4.2%	378.82	-1.2%
1998	452.73	6.0%	409.76	8.2%
1999	480.95	6.2%	447.05	9.1%
2000	530.97	10.4%	518.52	16.0%
2001	595.25	12.1%	577.95	11.5%
2002	649.14	9.1%	633.13	9.5%
2003 (Projected)	727.28	12.0%	702.82	11.0%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.4%	6.4%

 

Core plus Med. & Psych. Enh. - Family - 2 or More Medprime

	Gross Rate (1)	% Change	Net Rate (2)	% Change
1995	486.99		440.35
1996 (3)	369.87	-24.0%	307.07	-30.3%
1997	315.24	-14.8%	267.15	-13.0%
1998	351.98	11.7%	314.25	17.6%
1999	387.05	10.0%	360.66	14.8%
2000	453.22	17.1%	445.51	23.5%
2001	514.40	13.5%	502.37	12.8%
2002	555.29	7.9%	542.29	7.9%
2003 (Projected)	635.26	14.4%	615.10	13.4%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	4.5%	5.8%

(1) Represents primiums charged by the carriers.
(2) Represents cost to a participating agency.
(3) Inception of Medprime Rate Structure.

 

Exhibit IV

EMPIRE PLAN
PA 2 TIER GROUP RATES
1995 - 2003 Monthly Rates
(For Illustrative Purposes Only)

Core plus Med. & Psych. Enh.

Individual

	Gross Rate	% Change	Net Rate	% Change
1995	214.70	0.4%	193.54	-2.0%
1996 (1)	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	260.67	9.0%	253.98	14.4%
2001	289.41	11.0%	280.25	10.3%
2002	313.58	8.4%	305.67	9.1%
2003 (Projected)	350.40	11.7%	338.07	10.6%

Average Percent Increase

	Gross Rates % Change	Net Rate % Change
From Inception (1986)	7.8%	7.8%
Most Recent 10 Years	5.1%	5.8%
Most Recent 5Years	9.1%	10.6%

 

Family

	Gross Rate (1)	Gross Rates % Change	Net Rates (2)	Net Rate % Change
1995	486.99	0.5%	440.35	-1.5%
1996 (3)	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	578.26	7.3%	563.03	12.7%
2001	640.64	10.8%	619.28	10.0%
2002	703.61	9.8%	685.83	10.7%
2003 (Projected)	784.57	11.5%	757.49	10.4%

Average Percent Increase

	Gross Rates % Change	Net Rate % Change
From Inception (1986)	8.3%	8.3%
Most Recent 10 Years	5.1%	6.0%
Most Recent 5Years	8.8%	10.3%

(1) Represents 2 tier Empire Plan rates; See 5 tier rate schedule effective 1/1/96.

 

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