Department of Civil Service

PA03-15

TO: Participating Agency Health Benefit Administrators
FROM: The Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: August 25, 2003

Enclosed are the Second Quarter Empire Plan Experience Report for 2003 and the cover letter to the Chief Executive Officers. This report presents projected 2003 Empire Plan experience and the projected 2004 premium rates.

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August 25, 2003

Dear Chief Executive Officer:

Attached is the Empire Plan Second Quarter Experience Report for 2003. This report presents the projected 2003 Empire Plan experience based on claims paid through June 30, 2003, as well as the projected 2004 premium rates.

For Plan Year 2003, the Empire Plan carriers project a net dividend of $55.8 million, 1.6% 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 II and reflect a "best estimated" net rate increase of 18.6%. 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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EMPIRE PLAN EXPERIENCE REPORT
APRIL – JUNE 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

NYS HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
2ND QUARTER REPORT

PROJECTED 2003 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $55.8 million (1.6% of premium), or $9.1 million more than the margin loaded in the 2003 rates. The 2003 annual experience projected by the insurance carriers is reported in Exhibit I. Overall, the 2003 experience projection is encouraging.

For the Prescription Drug Program, Cigna projects a gain of $35.4 million or $12.7 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 coupled with a modest improvement in trend in comparison to the 20% level assumed in the rate development.

For the Medical Program, UnitedHealthcare projects a gain of $50.9 million (3.8% of premium) or $27.5 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 observed trend for 2003 (11.3% to 10.0%).

Group Health Incorporated (GHI) projects a gain of $1.6 million (1.8% of premium) for the Mental Health Substance Abuse Program or $1.1 million more than the margin level used in the development of the 2003 rates. This improvement is largely attributable to a projected reduction in trend from 7% to 5% for 2003.

Empire BlueCross BlueShield projects a net loss of $32.0 million (3.2% of premium) for the Hospital Program. The projected loss is primarily attributable to an increase in the 2002 claim base from the amount projected at the time of the 2003 rate development. While this also results in a higher trend (13.0% versus 9.7%) for 2002, the impact on the 2003 trend is less certain and is considered to be very conservative at this time. In addition, $5 million of the projected loss is attributable to an increase in assessed taxes.

2004 PROJECTED PREMIUM RATES

Exhibit II presents the projected 2004 Empire Plan gross and net premium rates assuming the application of $77.7 million in dividend to all payors. In the aggregate, the Empire Plan gross premium is projected to increase approximately 16.8% while the net premium is projected to increase 18.6%.

A range of the net premium rates (15.1% - 22.0% 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 III 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 IV presents, for illustrative purposes only, the 2-tier rate history from 1995 to 2004.

KEEPING YOU INFORMED

Participating Agency Benefit Statements

Empire Plan Benefit Statements will be distributed to Participating Agency enrollees' homes in September 2003. 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 2003 Fall Training School sponsored by the NYS Conference of Mayors and Municipal Officials on September 15-17, 2003, in Lake Placid, NY.
• The 2003 Annual Local Government Conference sponsored by the SUNY Potsdam Rural Services Institute on October 7, 2003, in Potsdam, NY.
• The 2003 Annual Convention and Educational Trade Show sponsored by the NYS School Boards Association on October 23-25, 2003, in Rochester, 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:

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

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:

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

Agency Code:

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Exhibit I

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)	996,396	1,101,825	126,447	108,042	1,336,314	69,379	9,176	5,982	84,537	1,069,271	3,486,518
(B) Incurred Claims (2)	937,554	979,012	102,275	85,966	1,167,253	54,494	7,590	6,339	68,423	1,011,954	3,185,184
(C) Administrative Expense (3)	90,922	102,366	8,553	7,224	118,143	11,943	1,578	1,031	14,552	21,950	245,567
(D) Gain/(Loss) (A-B-C)	(32,080)	20,447	15,619	14,852	50,918	2,942	8	(1,388)	1,562	35,367	55,767

(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: 2003 Carrier 2nd Quarter Report

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Exhibit II

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	411.67	13.7%	351.21	402.53	14.6%
Best Estimate	362.14	424.36	17.2%	351.21	415.22	18.2%
Pessimistic	362.14	436.33	20.5%	351.21	427.19	21.6%

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	866.01	13.4%	740.92	846.93	14.3%
Best Estimate	763.51	892.79	16.9%	740.92	873.71	17.9%
Pessimistic	763.51	918.06	20.2%	740.92	898.98	21.3%

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	346.68	17.5%	286.88	339.36	18.3%
Best Estimate	295.14	353.69	19.8%	286.88	346.37	20.7%
Pessimistic	295.14	360.33	22.1%	286.88	353.01	23.1%

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	801.02	15.0%	676.60	783.77	15.8%
Best Estimate	696.50	822.14	18.0%	676.60	804.89	19.0%
Pessimistic	696.50	842.06	20.9%	676.60	824.81	21.9%

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	736.03	16.9%	612.28	720.57	17.7%
Best Estimate	629.50	751.47	19.4%	612.28	736.01	20.2%
Pessimistic	629.50	766.08	21.7%	612.28	750.62	22.6%

(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	451.09	12.8%	384.89	441.87	14.8%
Best Estimate	400.0	465.86	16.5%	384.89	456.26	18.5%
Pessimistic	400.0	479.91	20.0%	384.89	470.69	22.3%

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	946.87	12.4%	811.41	927.59	14.3%
Best Estimate	842.38	977.92	16.1%	811.41	957.87	18.1%
Pessimistic	842.38	1,007.45	19.6%	811.41	988.17	21.8%

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	358.68	16.8%	297.50	351.33	18.1%
Best Estimate	307.02	366.33	19.3%	297.50	358.86	20.6%
Pessimistic	307.02	373.60	21.7%	297.50	366.25	23.1%

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	854.47	14.0%	724.05	837.10	15.6%
Best Estimate	749.40	878.40	17.2%	724.05	860.52	18.8%
Pessimistic	749.40	901.15	20.2%	724.05	883.78	22.1%

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	762.06	16.1%	636.67	746.54	17.3%
Best Estimate	656.42	778.87	18.7%	636.67	763.10	19.9%
Pessimistic	656.42	794.86	21.1%	636.67	779.34	22.4%

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

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Exhibit III

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%	384.89	11.7%
2004 (Projected)	465.86	16.5%	456.26	18.5%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	9.1%	10.1%

 

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%	811.41	12.1%
2004 (Projected)	977.92	16.1%	957.87	18.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.1%	9.1%

 

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%	297.50	17.2%
2004 (Projected)	366.33	19.3%	358.86	20.6%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	7.1%	8.5%

 

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%	724.05	14.4%
2004 (Projected)	878.40	17.2%	860.52	18.8%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	7.1%	8.2%

 

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%	636.67	17.4%
2004 (Projected)	778.87	18.7%	763.10	19.9%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.5%	7.8%

(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 IV

 

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)	417.81	16.9%	409.65	18.6%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.4%	8.5%
Most Recent 10 Years	7.1%	7.8%
Most Recent 5 Years	11.8%	13.1%

 

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)	940.77	16.8%	922.74	18.5%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.9%	9.0%
Most Recent 10 Years	7.0%	7.7%
Most Recent 5 Years	11.8%	13.1%

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

 

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

 

Attachment:

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

pdf version