Department of Civil Service

PA04-13

TO: Participating Agency Health Benefit Administrators
FROM: Robert DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: August 25, 2004

Enclosed is the Fourth Quarter Empire Plan Experience Report for 2004 and the cover letter to the Chief Executive Officers. This report presents the projected 2004 Empire Plan experience as well as projected 2005 premium rates.

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August 25, 2004

Dear Chief Executive Officer:

Attached is the Empire Plan Second Quarter Experience Report for 2004. This report presents the projected 2004 Empire Plan experience based on claims paid through June 30, 2004, as well as, the projected 2005 premium rates.

For Plan Year 2004, the Empire Plan carriers project a net dividend of $116.5 million, 3.0% of premium. The report explains the basis for these projections and future reports will include revisions based on additional claims experience.

The projected 2005 premium rates are presented in Exhibit II and reflect a "best estimated" net rate increase of 9.5%. The report also presents a range of the potential 2005 rate increase for your budget development considerations.

Please note in the "Keeping You Informed" section of this report, the 2004 PA Regional Meetings have been scheduled for late-September, earlier than usual. It is especially important that you and/or your representatives attend this year for an important briefing on the benefit changes that will become effective on January 1, 2005.

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 2004
Produced for
PARTICIPATING AGENCIES IN THE
NEW YORK STATE
HEALTH INSURANCE PROGRAM
by
the Employee Benefits Division
New York State Department of Civil Service
Daniel E. Wall
President, New York State Civil Service Commission

• Projected 2004 Empire Plan Experience
• 2005 Projected Premium Rates
• Keeping You Informed

Exhibits

1. Projected 2004 Empire Plan Experience
2. 2005 Projected PA Premium Rates
3. Empire Plan PA 5-Tier Group Rates 1996-2005
4. Empire Plan PA 2-Tier Group Rates 1996-2005

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NYS HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
2ND QUARTER REPORT
PROJECTED 2004 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $116.5 million (3.0% of premium), or $21.5 million more than the margin loaded in the 2004 rates. The 2004 annual experience projected by the insurance carriers is reported in Exhibit I. Overall, the 2004 experience projection is encouraging.

For the Prescription Drug Program, Cigna projects a gain of $52.3 million (4.3% of premium) or $17.7 million greater than the margin level used in the development of the 2004 rates. This increase is reflective of an improvement in the projected 2004 trend from 17.9%, estimated at rate development, to the current projection of 14.3%.

For the Medical Program, UnitedHealthcare (UHC) projects a gain of $60.9 million (4.2% of premium) or $23.2 million more than the margin level used in the development of the 2004 rates. This experience improvement is primarily attributable to a reduction in the 2003 estimated claim base. UHC currently projects the 2004 trend at 10.8%, the same trend projected at rate development.

Group Health Incorporated (GHI) projects a gain of $5.1 million (5.6% of premium) for the Mental Health Substance Abuse Program or $2.6 million more than the margin level used in the development of the 2004 rates. This improvement is largely attributable to a reduction in the projected 2003 claim base from the amount used in the development of the 2004 rates.

For the Hospital Program, Empire BlueCross BlueShield (EBCBS) projects a net loss of $1.7 million (0.1% of premium) or $21.9 million less than the margin level used in the development of the 2004 rates. The projected loss is attributable to an increase in EBCBS's expected 2004 trend from 11.2% to 13.3%.

In total, the emerging 2004 claims and resulting observed trends are lower than what was projected when the 2004 premium rates were developed. While this is positive to the Plan, at this time the carriers are reluctant to reflect lower trends in their 2005 pricing assumptions given the relatively small amount of 2004 incurred claims paid to date. This conservative carrier approach is not uncommon to the Plan or the industry.

2005 PROJECTED PREMIUM RATES

Exhibit II presents the projected 2005 Empire Plan gross and net premium rates assuming the application of $125 million in dividend to all payors. In the aggregate, the Empire Plan gross premium is projected to increase approximately 10.5% while the net premium is projected to increase 9.5%. This projection reflects savings as a result of plan benefit changes to be effective January 1, 2005.

A range of the net premium rates (6.3% - 12.4% increase) is also included. As 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 two-tier rate history from 1996 to 2005.

KEEPING YOU INFORMED

Participating Agency Benefit Statements

Empire Plan Benefit Statements will be distributed to Participating Agency enrollees' homes in October 2004. 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.

PA Regional Meetings

The 2004 Participating Agency Regional Meetings have been scheduled as follows:

• Monday, September 20, 2004, at the Holiday Inn in Saratoga Springs, NY;
• Tuesday, September 28, 2004, at the Holiday Inn Hotel & Conference Center in Suffern (Rockland County) NY; and
• Wednesday, September 29, 2004, at the Hilton Huntington Hotel in Melville, L.I., (Suffolk County), NY.

Please make every effort to attend the meeting in your area. EBD staff will present a detailed explanation of benefit changes that will become effective January 1, 2005. These changes are based on the results of collective bargaining at the State level. The meeting announcement has been mailed to all PA Chief Executive Officers (CEOs) and Health Benefit Administrators (HBAs).

NYSHIP Representation at Municipal Events

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

• The 2004 Fall School sponsored by the NYS Conference of Mayors on September 20-22, 2004, in Ellenville, NY.
• The 2004 Annual Convention and Educational Trade Show sponsored by the NYS School Boards Association on October 21-23, 2004, in Buffalo, NY.

If you are planning to attend these events, please stop by the NYSHIP exhibits.

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

Ms. Mary Frye
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

2004 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)	1,167,382	1,233,339	123,419	106,326	1,463,084	72,836	9,861	7,639	90,336	1,220,758	3,941,560
(B) Incurred Claims (2)	1,071,517	1,076,336	100,281	84,713	1,261,330	55,479	8,267	5,508	69,254	1,124,091	3,526,192
(C) Administrative Expense (3)	97,603	123,358	9,426	8,037	140,821	12,906	1,771	1,344	16,021	44,383	298,828
(D) Gain/(Loss) (A-B-C)	(1,738)	33,645	13,712	13,576	60,933	4,451	(177)	787	5,061	52,284	116,540

(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: Carriers 2004 2nd Quarter Report

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Exhibit II

Empire Plan
Participating Agency Premium Rates
Comparison of 2004 and Projected 2005 Rates
CORE ONLY

Plan Prime - Individual

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	411.56	446.76	8.6%	402.20	439.40	9.2%
Best Estimate	411.56	459.93	11.8%	402.20	452.57	12.5%
Pessimistic	411.56	472.37	14.8%	402.20	465.01	15.6%

Plan Prime - Family

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	867.11	941.24	8.5%	847.55	925.84	9.2%
Best Estimate	867.11	969.05	11.8%	847.55	953.65	12.5%
Pessimistic	867.11	995.33	14.8%	847.55	979.93	15.6%

MediPrime - Individual

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	330.38	360.99	9.3%	322.87	350.60	8.6%
Best Estimate	330.38	366.81	11.0%	322.87	356.42	10.4%
Pessimistic	330.38	372.45	12.7%	322.87	362.06	12.1%

MediPrime - Family-1

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	785.94	855.47	8.8%	768.24	837.08	9.0%
Best Estimate	785.94	875.95	11.5%	768.24	857.56	11.6%
Pessimistic	785.94	895.41	13.9%	768.24	877.02	14.2%

MediPrime - Family-2

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	704.75	769.69	9.2%	688.91	748.29	8.6%
Best Estimate	704.75	782.83	11.1%	688.91	761.43	10.5%
Pessimistic	704.75	795.50	12.9%	688.91	774.10	12.4%

Empire Plan
Participating Agency Premium Rates
Comparison of 2004 and Projected 2005 Rates
CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

Plan Prime - Individual

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	448.00	479.94	7.1%	438.15	472.55	7.9%
Best Estimate	448.00	494.85	10.5%	438.15	479.62	9.5%
Pessimistic	448.00	509.04	13.6%	438.15	501.65	14.5%

Plan Prime - Family

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	945.29	1,012.43	7.1%	924.74	996.98	7.8%
Best Estimate	945.29	1,043.98	10.4%	924.74	1,012.32	9.5%
Pessimistic	945.29	1,074.00	13.6%	924.74	1,058.55	14.5%

MediPrime - Individual

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	341.87	371.44	8.6%	334.22	361.05	8.0%
Best Estimate	341.87	377.82	10.5%	334.22	364.90	9.2%
Pessimistic	341.87	384.01	12.3%	334.22	373.62	11.8%

MediPrime - Family-1

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	839.18	903.94	7.7%	820.82	885.52	7.9%
Best Estimate	839.18	926.97	10.5%	820.82	897.65	9.4%
Pessimistic	839.18	948.98	13.1%	820.82	930.56	13.4%

MediPrime - Family-2

	Gross Rates(1) 2004	Gross Rates(1) 2005 (3)	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005 (3)	Net Rates(2) % Change
Optimistic	733.05	795.45	8.5%	716.88	774.04	8.0%
Best Estimate	733.05	809.93	10.5%	716.88	782.92	9.2%
Pessimistic	733.05	823.96	12.4%	716.88	802.55	12.0%

(1) Represents premium charged by carrier.
(2) Represents cost to a participating agency.
(3) Projected Rates.

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Exhibit III

EMPIRE PLAN
PA 5 TIER GROUP RATES
1996-2005 Monthly Rates

Core Plus Medical & Psychiatric Enhancement

Individual Planprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	448.00	12.0%	438.15	13.8%
2005 (Projected)	494.85	10.5%	479.62	9.5%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.8%	9.6%

Family Planprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	945.29	12.2%	924.74	14.0%
2005 (Projected)	1,043.98	10.4%	1,012.32	9.5%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.0%	8.7%

 

Individual Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	341.87	11.4%	334.22	12.3%
2005 (Projected)	377.82	10.5%	364.90	9.2%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.7%	7.8%

 

Family - 1 Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	839.18	12.0%	820.82	13.4%
2005 (Projected)	926.97	10.5%	897.65	9.4%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.9%	7.7%

 

Family - 2 or More Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
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	733.05	11.7%	716.88	12.6%
2005 (Projected)	809.93	10.5%	782.92	9.2%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.2%	7.3%

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

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Exhibit IV

EMPIRE PLAN
PA 2 TIER GROUP RATES
1996-2005 Monthly Rates
(For Illustrative Purposes Only)
Core Plus Medical & Psychiatric Enhancement

Individual

Year	Gross Rate	% Change	Net Rate	% Change
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	402.70	12.7%	394.31	14.2%
2005 (Projected)	445.38	10.6%	431.45	9.4%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.3%	8.4%
Most Recent 10 Years	8.3%	9.5%
Most Recent 5 Years	11.3%	11.2%

Family

Year	Gross Rate	% Change	Net Rate	% Change
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	899.98	11.7%	881.48	13.2%
2005 (Projected)	994.40	10.5%	963.83	9.3%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.7%	8.7%
Most Recent 10 Years	8.2%	9.5%
Most Recent 5 Years	11.5%	11.4%

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

 

Report - PDF Version

Exhibits I - PDF Version

Exhibits II - PDF Version

Exhibits III - PDF Version

Exhibits IV - PDF Version