Department of Civil Service

PA04-24

TO: Participating Agency Health Benefit Administrators
FROM: Robert W. DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: December 15, 2004

Enclosed are the Third 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 and approved 2005 premium rates.

---

December 15, 2004

Dear Chief Executive Officer:

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

For Plan Year 2005, the Empire Plan carriers project a net dividend of $131.2 million, 3.3% of premium. The report explains the basis for this projection and future reports will include revisions based on additional claims experience. The approved 2005 premium rates are presented in Exhibit II and reflect an aggregate net rate increase of 7.4%.

I hope this report is both 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 Experience Report

JULY - SEPTEMBER 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 Premium Rates
• Keeping You Informed

Exhibits

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

---

NYS HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
3RD QUARTER REPORT

PROJECTED 2004 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $131.2 million (3.3% of premium), or $36.2 million more than the margin loaded in the 2004 rates. The 2004 annual experience projected by the insurance carriers is reported in Exhibit I and is viewed to be quite favorable.

For the Prescription Drug Program, Cigna projects a gain of $61.4 million (5.0% of premium) or $26.8 million greater than the margin level used in the development of the 2004 rates. This increase in projected surplus is reflective of an improvement in the projected 2004 trend from 17.9%, estimated at rate development, to the current projection of 12.6%.

For the Medical Program, UnitedHealthcare (UHC) projects a gain of $60.1 million (4.1% of premium) or $22.4 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. Though this reduction also impacts the 2004 incurred claim base, UHC continues to project the 2004 trend at the same trend level (10.8%) assumed in the 2004 rate development.

Group Health Incorporated (GHI) projects a gain of $8.1 million (8.9% of premium) for the Mental Health Substance Abuse Program or $5.6 million more than the margin level used in the development of the 2004 rates. This improvement is largely attributable to a reduction in 2003 and 2004 trend (4.0% and 2.1%, respectively) from the trends (5% for both 2003 and 2004) used in the development of the 2004 rates.

For the Hospital Program, Empire BlueCross BlueShield (EBCBS) projects a gain of $1.6 million (0.1% of premium) or $18.6 million less than the margin level used in the development of the 2004 rates. While the projected 2004 trend (13.1%) is higher than the trend level assumed in the 2004 rate development (11.2%), EBCBS has modestly reduced their projected trend from second quarter trend levels as more claims have been observed.

2005 PROJECTED PREMIUM RATES

Exhibit II presents the actual 2005 Empire Plan gross and net premium rates. In aggregrate, the Empire Plan gross premium increases 7.6% while the net premium increases 7.4%. The 2005 rates are based on an aggregate trend of 13.5%, a margin level equal to 2.4% of premium, a 7.8% increase in retention and plan design changes to be implemented for most groups that produce $172 million in savings. In addition, $100.0 million in all payor dividends were used to mitigate the gross premium increase.

Also contributing to this favorable rate increase is the use of retrospective premium arrangements, as was done last year. A retro premium arrangement provides for the payment of a reduced premium level throughout the year with a provision for an additional premium payment at settlement in the event that claims and expenses exceed the premium paid throughout the year. This strategy is used when we believe the carriers’ premium demand is overly conservative. The retro makes it possible to remove the claims margin from the rate and to reduce risk charges. Any necessary retrospective premium payment would be funded through available dividends. While the retro premium liability is approximately $300 million, the State and its benefit consultant, Mellon, do not expect that any retro payment will be necessary.

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

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 were held 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.

The attendance was excellent - about 550 representatives from participating agencies attended. The materials distributed at the meetings are available on our website for those who were unable to attend.

NYSHIP Representation at Municipal Events

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

• The 2005 Training School and Annual Meeting sponsored by the Association of Towns of the State of New York, February 20-22, 2005, in New York City.
• The 2005 Annual Conference sponsored by the NYS Government Finance Officers’ Association in Albany, April 6-8, 2005.

We also expect to be represented at the upcoming 2005 Legislative Conferences sponsored by the NYS Association of Counties and NYS Conference of Mayors.

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

---

TRANSMISSION OF REPORTS ELECTRONICALLY

Instructions to read PDF files using ADOBE ACROBAT READER™:

What is PDF?

It is a file format compatible with many different computers and printers. Adobe Acrobat Reader™ comes in versions that run in DOS, Windows, Mac, UNIX and OS/2. Be sure to download the correct version. Their page contains download instructions.

Disclaimer

The Department of Civil Service is not responsible for Adobe Acrobat Reader™ or your use of it. The information provided herein is provided for your convenience and does not in any way constitute an endorsement of this software product or company.

To Download

Go to Adobe Systems Web Page at:

http://www.adobe.com/supportservice/custsupport/download.html

Follow Instructions for Downloading Under:

Acrobat Reader | Macintosh | Windows | DOS | UNIX | OS/2

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: _______________________

---

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)	1,170,004	1,234,509	123,419	106,583	1,464,511	73,035	9,895	7,653	90,583	1,221,996	3,947,094
(B) Incurred Claims (2)	1,170,472	1,062,691	108,036	93,131	1,263,858	53,474	7,899	5,259	66,632	1,117,335	3,518,297
(C) Administrative Expense (3)	97,966	122,957	9,452	8,117	140,526	12,792	1,755	1,330	15,877	43,189	297,558
(D) Gain/(Loss) (A-B-C)	1,566	48,861	5,931	5,335	60,127	6,769	241	1,064	8,074	61,472	131,239

(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: 2004 Carrier 3rd Quarter Report

---

Exhibit II

Empire Plan
Participating Agency Premium Rates
Comparison of 2004 and 2005 Rates
Mediprime Rate Structure

CORE ONLY - Planprime

	Gross Rates(1) 2004	Gross Rates(1) 2005	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005	Net Rates(2) % Change
Individual (81)	411.56	453.01	10.1%	402.20	446.36	11.0%
Family (82)	867.11	957.03	10.4%	847.55	942.99	11.3%

CORE ONLY - Medprime

	Gross Rates(1) 2004	Gross Rates(1) 2005	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005	Net Rates(2) % Change
Individual	330.38	329.75	-0.2%	322.87	322.87	0.0%
Family - 1 medicare	785.94	833.76	6.1%	768.24	819.48	6.7%
Family - 2 medicares	704.75	710.49	0.8%	688.91	696.00	1.0%

CORE PLUS MEDICAL AND PSYCHIATRIC ENHANCEMENTS - Planprime

	Gross Rates(1) 2004	Gross Rates(1) 2005	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005	Net Rates(2) % Change
Individual (71)	448.00	490.41	9.5%	438.15	478.49	9.2%
Family (72)	945.29	1,038.64	9.9%	924.74	1,013.68	9.6%

CORE PLUS MEDICAL AND PSYCHIATRIC ENHANCEMENTS - Medprime

	Gross Rates(1) 2004	Gross Rates(1) 2005	Gross Rates(1) % Change	Net Rates(2) 2004	Net Rates(2) 2005	Net Rates(2) % Change
Individual	341.87	340.50	-0.4%	334.22	331.93	-0.7%
Family - 1 medicare	839.18	888.71	5.9%	820.82	867.09	5.6%
Family - 2 medicares	733.05	738.79	0.8%	716.88	720.53	0.5%

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

---

Exhibit III

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

Core Plus Medical & Psychiatric Enhancements

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	490.41	9.5%	478.49	9.2%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.7%	9.5%

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	1,038.64	9.9%	1,013.68	9.6%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	7.9%	8.8%

 

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	340.50	-0.4%	331.93	-0.7%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.6%	6.8%

 

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	888.71	5.9%	867.09	5.6%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.4%	7.4%

 

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	738.79	0.8%	720.53	0.5%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.2%	6.4%

(1) Represents premiums 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
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	433.70	7.7%	423.31	7.4%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.2%	8.3%
Most Recent 10 Years	8.0%	9.2%
Most Recent 5 Years	10.7%	10.8%

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	968.40	7.6%	945.11	7.2%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.6%	8.6%
Most Recent 10 Years	7.9%	9.2%
Most Recent 5 Years	10.9%	10.9%

(1) Represents 2 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