Department of Civil Service

PA03-12

TO: Participating Agency Health Benefit Administrators
FROM: Robert W. DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: June 5, 2003

Enclosed is the First Quarter Empire Plan Experience Report for 2003 and the cover letter to the Chief Executive Officers. This report presents the actual 2002 Empire Plan experience, projected 2003 Empire Plan experience and projected 2004 premium rates.

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Dear Chief Executive Officer:

Attached is the Empire Plan First Quarter Experience Report for 2003. This report presents the actual 2002 Empire Plan experience, projected 2003 Empire Plan experience based on claims paid through March 31, 2003, and projected 2004 premium rates.

The Empire Plan carriers declared a 2002 net dividend of $47.1 million or 1.6% of premium. For Plan Year 2003, the Empire Plan carriers project a net dividend of $43.4 million, 1.2% of premium. The report explains the basis for these projections and future reports will include revisions based on additional claims experience.

The projected 2004 premium rates are presented in Exhibit III and reflect a "best estimated" net increase of 16.9%. The report also presents a range of the potential 2004 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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PARTICIPATING AGENCIES

EMPIRE PLAN 2003 FIRST QUARTER EXPERIENCE REPORT

JANUARY - MARCH 2003
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

Actual 2002 Empire Plan Experience : Page 1
Projected 2003 Empire Plan Experience : Page 2
2004 Projected Premium Rates : Pages 2
Keeping You Informed : Page 3

Attachment 1 -Transmission of Reports Electronically

Exhibits

I. Actual 2002 Empire Plan Experience
II. Projected 2003 Empire Plan Experience
III. 2004 Projected PA Premium Rates
IV. Empire Plan PA 5-Tier Group Rates 1995-2004
V. Empire Plan PA 2-Tier Group Rates 1995-2004

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NYS HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
1st QUARTER REPORT

ACTUAL 2002 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers declared a composite dividend of $47.1 million (1.6% of premium), or $2 million less than the margin loaded in the 2002 rates. The 2002 annual experience is reported in Exhibit I.

Cigna has declared a $10.4 million dividend (1.2% of premium) for the Prescription Drug Program. The declared dividend is $1.5 million greater than the 4th Quarter projection and $10.4 million less than what was projected at the 2002 rate renewal. The less favorable experience is attributable to an increase in trend from 18%, projected at rate renewal, to 20%.

UnitedHealthcare has declared a $38.0 million dividend (3.1% of premium), $4.4 million greater than the 4th Quarter projection and $22.0 million greater than what was projected at the 2002 rate renewal. This increase is primarily due to a lower 2001 claim base than what was assumed during the development of the 2002 premium rates and a moderate reduction in the projected 2002 trend.

Group Health Incorporated declared a $3.1 million loss (4.2% of premium) for the Mental Health and Substance Abuse Program, a $1.0 million greater loss than the 4th Quarter projection and $4.2 million less than the margin loaded in the 2002 rates. The loss is primarily attributable to an increase in utilization from the level projected at the time of the 2002 rate development. Since 2001, Program trend has increased from 1% to over 6%.

Empire BlueCross BlueShield (EBCBS) declared a $1.8 million dividend (0.2% of premium). An agreement reached between EBCBS and the State regarding the administration expenses included a $3.3 million credit for the 2001 plan year and turned what would have been a modest program loss in 2002 into a modest gain. As the 2002 premium was developed without a margin, the actual experience approximated the projected experience.

PROJECTED 2003 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $43.4 million (1.2% of premium), or $3.2 million less than the margin loaded in the 2003 rates. The 2003 annual experience projected by the insurance carriers is reported in Exhibit II. Overall, the 2003 experience projection is encouraging.

For the Prescription Drug Program, Cigna projects a gain of $29.5 million or $6.8 million greater than the margin level used in the development of the 2003 rates. This increase is reflective of the modest improvement in the 2002 claim base that occurred after the development of the 2003 rates.

For the Medical Program, UnitedHealthcare projects a gain of $32.0 million (2.4% of premium) or $8.6 million more than the margin level used in the development of the 2003 rates. This experience improvement is attributable to a modest reduction in the 2002 estimated claim base as well as a modest reduction in the 2003 retention estimate. The 2003 medical trend is still estimated at 11.3%.

Group Health Incorporated (GHI) projects a gain of $0.6 million (0.7% of premium) for the Mental Health Substance Abuse Program, which is comparable to the margin loaded in the 2003 rates.

Empire BlueCross BlueShield projects a net loss of $18.7 million (1.9% of premium) for the Hospital Program. The projected loss is primarily attributable to an increase in the 2002 claim base from what was projected at the time of the 2003 rate development, coupled with a less favorable trend projection for 2003. With only 3 months of 2003 paid data, the loss projected by BlueCross appears conservative at this time.

2004 PROJECTED PREMIUM RATES

Exhibit III presents the projected 2004 Empire Plan gross and net premium rates assuming the application of $78.0 million in dividend to all payors. In the aggregate, the Empire Plan gross premium is projected to increase approximately 15.1% while the net premium is projected to increase 16.9%.

A range of projected gross and net premium rates (13.7% - 20.2% increase) 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 IV presents the individual and family rate history for the Core Plus Medical and Psychiatric Enhancement option based on the 5-tier Empire Plan billing rate history in effect since January 1, 1996. Exhibit V presents, for illustrative purposes only, the 2-tier rate history from 1995 to 2004.

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 in PDF file. 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 represented at the following municipal events:

• The 2003 Annual Conference by the NYS Government Finance Officers' Association on March 19-21, 2003, in Albany, NY.
• The 2003 Local Government Conference sponsored by the NYS Tug Hill Commission on March 27, 2003, in Watertown, NY
• The 2003 Third Annual Town Management and Finance School sponsored by the Association of Towns of the State of New York on May 14-16, 2003, in Saratoga Springs, NY.
• The 2003 Annual Meeting sponsored by the NYS Conference of Mayors and Municipal Officials on June 2, 2003, in Kerhonkson, NY.
• The 2003 Training Seminar sponsored by the NYS Association of Personnel and Civil Service Officers on June 10, 2003, in Alexandria Bay, NY.

CEO and HBA Name and Address Changes

Please be sure to notify the Employee Benefits Division of any changes in the names and/or addresses of your agency’s CEO or HBA so that we may keep our mailing lists up-to-date. This updated information may be sent to:

Ms. Mary Frye
Director - Employee Insurance Programs
Rm. 159
NYS Department of Civil Service
State Office Campus, Building #1
Albany, NY 12239

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TRANSMISSION OF REPORTS ELECTRONICALLY

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Exhibit I

2002 FINAL 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)	867,583	1,002,353	111,526	92,155	1,206,034	60,199	7,390	5,316	72,905	861,525	3,008,047
(B) Incurred Claims (2)	800,422	875,322	100,626	84,325	1,060,273	48,061	7,379	6,196	61,636	834,430	2,756,761
(C) Administrative Expense (3)	65,345	92,960	8,118	6,694	107,772	11,850	1,454	1,047	14,351	16,727	204,195
(D) Gain/(Loss) (A-B-C)	1,816	34,071	2,782	1,136	37,989	288	(1,443)	(1,443)	(1,927)	(3,082)	47,091

 

(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: 2002 Carrier Final Settlement Reports

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Exhibit II

2003 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)	995,840	1,100,622	126,728	107,343	1,334,693	69,123	9,135	5,967	84,225	1,068,983	3,483,741
(B) Incurred Claims (2)	929,821	991,713	108,452	86,054	1,186,219	54,211	8,341	6,400	68,952	1,017,594	3,202,586
(C) Administrative Expense (3)	84,745	100,883	8,548	7,010	116,441	12,064	1,594	1,041	14,699	21,885	237,770
(D) Gain/(Loss) (A-B-C)	(18,726)	8,026	9,728	14,279	32,033	2,848	(800)	(1,474)	574	29,504	43,385

 

(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: 2003 Carrier First Quarter Reports

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Exhibit III

Empire Plan
Participating Agency Premium Rates
Comparison of 2003 and Projected 2004 Rates
CORE ONLY

Plan Prime - Individual

	Gross Rates(1) 2003	Gross Rates(1) 2004	Gross Rates(1) % Change	Net Rates(2) 2003	Net Rates(2) 2004	Net Rates(2) % Change
Optimistic	362.14	404.87	11.8%	351.21	395.74	12.7%
Best Estimate	362.14	416.47	15.1%	351.21	407.61	16.1%
Pessimistic	362.14	428.42	18.3%	351.21	419.29	19.4%

Plan Prime - Family

	Gross Rates(1) 2003	Gross Rates(1) 2004	Gross Rates(1) % Change	Net Rates(2) 2003	Net Rates(2) 2004	Net Rates(2) % Change
Optimistic	763.51	851.58	11.5%	740.92	832.51	12.4%
Best Estimate	763.51	876.64	14.8%	740.92	857.57	15.7%
Pessimistic	763.51	901.31	18.0%	740.92	882.24	19.1%

MediPrime - Individual

	Gross Rates(1) 2003	Gross Rates(1) 2004	Gross Rates(1) % Change	Net Rates(2) 2003	Net Rates(2) 2004	Net Rates(2) % Change
Optimistic	295.14	344.47	16.7%	286.88	337.05	17.5%
Best Estimate	295.14	350.34	18.7%	286.88	342.92	19.5%
Pessimistic	295.14	356.13	20.7%	286.88	348.71	21.6%

MediPrime - Family-1

	Gross Rates(1) 2003	Gross Rates(1) 2004	Gross Rates(1) % Change	Net Rates(2) 2003	Net Rates(2) 2004	Net Rates(2) % Change
Optimistic	696.50	791.20	13.6%	676.60	773.86	14.4%
Best Estimate	696.50	810.25	16.3%	676.60	792.91	17.2%
Pessimistic	696.50	829.03	19.0%	676.60	811.69	20.0%

MediPrime - Family-2

	Gross Rates(1) 2003	Gross Rates(1) 2004	Gross Rates(1) % Change	Net Rates(2) 2003	Net Rates(2) 2004	Net Rates(2) % Change
Optimistic	629.50	730.79	16.1%	612.28	715.16	16.8%
Best Estimate	629.50	743.85	18.2%	612.28	728.22	18.9%
Pessimistic	629.50	756.74	20.2%	612.28	741.11	21.0%

(1) Represents premium charged by carriers.
(2) Represents cost to a participating agency.

 

CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

Plan Prime - Individual

	Gross Rates(1) 2003	Gross Rates(1) 2004	Gross Rates(1) % Change	Net Rates(2) 2003	Net Rates(2) 2004	Net Rates(2) % Change
Optimistic	400.0	444.40	11.1%	384.89	435.19	13.1%
Best Estimate	400.0	458.35	14.6%	384.89	448.76	16.6%
Pessimistic	400.0	472.11	18.0%	384.89	462.90	20.3%

Plan Prime - Family

	Gross Rates(1) 2003	Gross Rates(1) 2004	Gross Rates(1) % Change	Net Rates(2) 2003	Net Rates(2) 2004	Net Rates(2) % Change
Optimistic	842.38	932.72	10.7%	811.41	913.46	12.6%
Best Estimate	842.38	962.05	14.2%	811.41	942.02	16.1%
Pessimistic	842.38	990.98	17.6%	811.41	971.72	19.8%

MediPrime - Individual

	Gross Rates(1) 2003	Gross Rates(1) 2004	Gross Rates(1) % Change	Net Rates(2) 2003	Net Rates(2) 2004	Net Rates(2) % Change
Optimistic	307.02	356.48	16.1%	297.50	349.03	17.3%
Best Estimate	307.02	362.98	18.2%	297.50	355.41	19.5%
Pessimistic	307.02	369.40	20.3%	297.50	361.95	21.7%

MediPrime - Family-1

	Gross Rates(1) 2003	Gross Rates(1) 2004	Gross Rates(1) % Change	Net Rates(2) 2003	Net Rates(2) 2004	Net Rates(2) % Change
Optimistic	749.40	844.82	12.7%	724.05	827.36	14.3%
Best Estimate	749.40	866.69	15.7%	724.05	848.72	17.2%
Pessimistic	749.40	888.28	18.5%	724.05	870.82	20.3%

MediPrime - Family-2

	Gross Rates(1) 2003	Gross Rates(1) 2004	Gross Rates(1) % Change	Net Rates(2) 2003	Net Rates(2) 2004	Net Rates(2) % Change
Optimistic	656.42	756.88	15.3%	636.67	741.19	16.4%
Best Estimate	656.42	771.32	17.5%	636.67	755.38	18.6%
Pessimistic	656.42	785.58	19.7%	636.67	769.89	20.9%

(1) Represents premium charged by carriers.
(2) Represents cost to a participating agency.

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Exhibit IV

EMPIRE PLAN
PA 5 TIER GROUP RATES
1995-2004 Monthly Rates

Core Plus Medical & Psychiatric Enhancement

Individual Planprime

Year	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	400.00	13.1%	384.98	11.7%
2004 (Projected)	458.35	14.6%	448.76	16.6%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.9%	9.9%

 

Family Planprime

Year	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	742.98	10.3%	723.97	11.2%
2003	842.38	13.4%	811.59	12.1%
2004 (Projected)	962.05	14.2%	942.02	16.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	7.9%	8.9%

 

Individual Medprime

Year	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	307.02	18.1%	297.52	17.2%
2004 (Projected)	362.98	18.2%	355.41	19.5%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	7.0%	8.4%

 

Family - 1 Medprime

Year	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	749.40	15.4%	724.17	14.4%
2004 (Projected)	866.69	15.7%	848.72	17.2%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.9%	8.0%

 

Family - 2 or More Medprime

Year	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	656.42	18.2%	636.73	17.4%
2004 (Projected)	771.32	17.5%	755.38	18.6%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.3%	7.7%

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

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Exhibit V

 

EMPIRE PLAN
PA 2 TIER GROUP RATES
1995-2004 Monthly Rates
(For Illustrative Purposes Only)

Core Plus Medical & Psychiatric Enhancement

Individual

Year	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	357.44	14.0%	345.36	13.0%
2004 (Projected)	411.62	15.2%	403.44	16.8%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.3%	8.4%
Most Recent 10 Years	6.9%	7.6%
Most Recent 5 Years	11.5%	12.7%

 

Family

Year	Gross Rate	% Change	Net Rate	% Change
1995	486.99	0.5%	440.35	-1.5%
1996 (1)	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	805.64	14.5%	778.82	13.6%
2004 (Projected)	927.33	15.1%	909.25	16.7%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.8%	8.9%
Most Recent 10 Years	6.8%	7.5%
Most Recent 5 Years	11.5%	12.7%

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

 

pdf version

exhibit I pdf version
exhibit II pdf version
exhibit III pdf version
exhibit IV pdf version
exhibit V pdf version