Department of Civil Service

PA05-02

TO: Participating Agency Health Benefit Administrators
FROM: Robert W. DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: February 28, 2005

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 2006 premium rates.

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February 28, 2005

Dear Chief Executive Officer:

Attached is the Empire Plan Fourth Quarter Experience Report for 2005. This report presents the projected 2004 Empire Plan experience based on claims paid through December 31, 2004, as well as the projected 2006 premium rates.

The Empire Plan carriers project a 2004 net dividend of $163.0 million, 4.1% of premium. The report explains the basis for this projection. The carriers will issue the 2004 experience statement on March 15, 2005.

The projected 2006 premium rates are presented in Exhibit II and reflect a “best estimated” net increase of 10.6%. The report also presents a range of the potential 2006 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

OCTOBER – DECEMBER 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
• Projected 2006 Premium Rates
• Keeping You Informed

Exhibits

1. Projected 2004 Empire Plan Experience
2. Projected 2006 Approved PA Premium Rates
3. Empire Plan PA 5-Tier Group Rates 1996-2006
4. Empire Plan PA 2-Tier Group Rates 1996-2006

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NYS HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
4TH QUARTER REPORT

PROJECTED 2004 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $163.0 million (4.1% of premium), or $67.9 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 $63.2 million (5.2% of premium) or $28.6 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 12.3%.

For the Medical Program, UnitedHealthcare (UHC) projects a gain of $69.9 million (4.8% of premium) or $32.1 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 incurred claim base and an improvement in the projected 2004 trend from 10.8%, estimated at rate development, to the current projection of 9.8%.

Group Health Incorporated (GHI) projects a gain of $7.9 million (8.7% of premium) for the Mental Health Substance Abuse Program or $5.4 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 (3.5% and 3.3%, 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 $22.0 million (1.9% of premium) or $1.8 million more than the margin level used in the development of the 2004 rates. This projection is considered to be consistent with the projection made during the rate development.

2006 PROJECTED PREMIUM RATES

Exhibit II presents the projected 2006 Empire Plan gross and net premium rates assuming the application of $125.0 million in dividend to all payors. In aggregate, the Empire Plan gross premium is projected to increase approximately 11.3% while the net premium is projected to increase 10.6%.

A range of projected gross and net premium rates is also included (7.9% - 13.7%). It should be noted that carrier rate projections made at this time of the year have been historically conservative. In developing the projected 2006 rates, the Department of Civil Service reduced the carrier projections by approximately 2.5%. 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 1996 to 2006.

KEEPING YOU INFORMED

New Empire Plan Cards and Identification Numbers

Empire Plan benefit cards with new alternate identification (ID) numbers are scheduled to be mailed to all enrollees during the month of March. To better protect the confidentiality of personal benefits information, the alternate ID numbers are randomly generated, nine-digit numbers. In addition to the new ID numbers, the cards have been redesigned to include information that will make it easier for enrollees to access their benefits and for enrollees and providers to obtain information about eligibility, benefits and claim submission. Your agency HBA will receive detailed information about the card re-issue, including mailing dates, and the alternate ID’s in memos issued to them during February.

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 Local Government Conference sponsored by the NYS Tug Hill Commission, March 31, 2005, in Watertown, NY.

• The 2005 Annual Conference sponsored by the NYS Government Finance Officers’ Association, April 6-8, 2005, in Albany, NY.

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

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.

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 B. 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)	1,170,852	1,235,006	123,297	106,837	1,464,140	73,182	9,906	7,677	90,765	1,222,536	3,949,293
(B) Incurred Claims (2)	1,051,777	1,056,647	107,424	90,959	1,255,030	54,257	7,120	5,605	66,982	1,116,118	3,489,907
(C) Administrative Expense (3)	97,095	122,429	9,618	8,210	140,257	12,803	1,726	1,341	15,870	43,190	296,412
(D) Gain/(Loss) (A-B-C)	21,980	55,930	6,255	7,668	69,853	6,122	1,060	731	7,913	63,228	162,974

(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 4th Quarter Report

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Exhibit II

Empire Plan
Participating Agency Premium Rates
Comparison of 2005 and Projected 2006 Rates

CORE ONLY

Plan Prime - Individual

	Gross Rates(1) 2005	Gross Rates(1) 2006 (3)	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006 (3)	Net Rates(2) % Change
Optimistic	453.01	487.64	7.6%	446.36	476.41	6.7%
Best Estimate	453.01	502.33	10.9%	446.36	491.10	10.0%
Pessimistic	453.01	516.38	14.0%	446.36	505.15	13.2%

Plan Prime - Family

	Gross Rates(1) 2005	Gross Rates(1) 2006 (3)	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006 (3)	Net Rates(2) % Change
Optimistic	957.03	1,029.97	7.6%	942.99	1,006.50	6.7%
Best Estimate	957.03	1,061.01	10.9%	942.99	1,037.54	10.0%
Pessimistic	957.03	1,090.59	14.0%	942.99	1,067.12	13.2%

MediPrime - Individual

	Gross Rates(1) 2005	Gross Rates(1) 2006 (3)	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006 (3)	Net Rates(2) % Change
Optimistic	329.75	366.66	11.2%	322.87	354.48	9.8%
Best Estimate	329.75	373.75	13.3%	322.87	361.57	12.0%
Pessimistic	329.75	380.70	15.5%	322.87	368.52	14.1%

MediPrime - Family 1

	Gross Rates(1) 2005	Gross Rates(1) 2006 (3)	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006 (3)	Net Rates(2) % Change
Optimistic	833.76	908.98	9.0%	819.48	884.56	7.9%
Best Estimate	833.76	932.40	11.8%	819.48	907.98	10.8%
Pessimistic	833.76	954.94	14.5%	819.48	930.52	13.6%

MediPrime - Family 2

	Gross Rates(1) 2005	Gross Rates(1) 2006 (3)	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006 (3)	Net Rates(2) % Change
Optimistic	710.49	788.01	10.9%	696.00	762.62	9.6%
Best Estimate	710.49	803.81	13.1%	696.00	778.42	11.8%
Pessimistic	710.49	819.27	15.3%	696.00	793.88	14.1%

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

 

CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

Plan Prime - Individual

	Gross Rates(1) 2005	Gross Rates(1) 2006 (3)	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006 (3)	Net Rates(2) % Change
Optimistic	490.41	525.90	7.2%	478.49	514.06	7.4%
Best Estimate	490.41	542.61	10.6%	478.49	526.03	9.9%
Pessimistic	490.41	558.67	13.9%	478.49	546.83	14.3%

Plan Prime - Family

	Gross Rates(1) 2005	Gross Rates(1) 2006 (3)	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006 (3)	Net Rates(2) % Change
Optimistic	1,038.64	1,113.43	7.2%	1,013.68	1,088.48	7.4%
Best Estimate	1,038.64	1,148.87	10.6%	1,013.68	1,113.81	9.9%
Pessimistic	1,038.64	1,182.85	13.9%	1,013.68	1,157.90	14.2%

MediPrime - Individual

	Gross Rates(1) 2005	Gross Rates(1) 2006 (3)	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006 (3)	Net Rates(2) % Change
Optimistic	340.50	377.67	10.9%	331.93	365.38	10.1%
Best Estimate	340.50	385.34	13.2%	331.93	371.49	11.9%
Pessimistic	340.50	392.87	15.4%	331.93	380.58	14.7%

MediPrime - Family 1

	Gross Rates(1) 2005	Gross Rates(1) 2006 (3)	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006 (3)	Net Rates(2) % Change
Optimistic	888.71	965.19	8.6%	867.09	939.83	8.4%
Best Estimate	888.71	991.57	11.6%	867.09	959.28	10.6%
Pessimistic	888.71	1,017.07	14.4%	867.09	991.71	14.4%

MediPrime - Family 2

	Gross Rates(1) 2005	Gross Rates(1) 2006 (3)	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006 (3)	Net Rates(2) % Change
Optimistic	738.79	816.97	10.6%	720.53	791.14	9.8%
Best Estimate	738.79	834.30	12.9%	720.53	804.72	11.7%
Pessimistic	738.79	851.29	15.2%	720.53	825.46	14.6%

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

 

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Exhibit III

EMPIRE PLAN
PA 5 TIER GROUP RATES
1996-2006 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%
2006 Projected	542.61	10.6%	526.03	9.9%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.8%	9.6%
Most Recent 5 Years	10.8%	10.9%

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%
2006 Projected	1,148.87	10.6%	1,113.81	9.9%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.2%	8.9%
Most Recent 5 Years	11.3%	11.3%

(1) Represents premium paid to the carriers.
(2) Represents cost to a participating agency.
(3) Inception of Medprime Rate Structure.

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%
2006 Projected	385.34	13.2%	371.49	11.9%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.3%	7.3%
Most Recent 5 Years	9.6%	9.3%

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%
2006 Projected	991.57	11.6%	959.28	10.6%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.9%	7.6%
Most Recent 5 Years	10.8%	10.7%

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	738.79	0.8%	720.53	0.5%
2006 Projected	834.30	12.9%	804.72	11.7%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.9%	6.9%
Most Recent 5 Years	10.3%	10.0%

(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
1996-2006 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%
2006 Projected	483.36	11.5%	468.69	10.7%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.3%	8.4%
Most Recent 10 Years	8.3%	9.4%
Most Recent 5 Years	10.8%	10.9%

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%
2006 Projected	1,077.37	11.3%	1,045.18	10.6%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.7%	8.7%
Most Recent 10 Years	8.2%	9.4%
Most Recent 5 Years	11.0%	11.1%

(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