Department of Civil Service

PA05-18

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

Enclosed are the Second Quarter Empire Plan Experience Report for 2005 and the cover letter to the Chief Executive Officers. This report presents the projected 2005 Empire Plan experience and projected 2006 premium rates.

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September 28, 2005

Dear Chief Executive Officer:

Attached is the Empire Plan Second Quarter Experience Report for 2005. This report presents the projected 2005 Empire Plan experience based on claims paid through June 30, 2005, and projected 2006 premium rates.

For Plan Year 2005, the Empire Plan carriers project a net dividend of $198.0 million, 4.6% of premium. The report presents the basis for these projections and future reports will include revisions based on additional claims experience.

The projected 2006 premium rates are presented in Exhibit II and reflect a "best estimated" net increase of 8.6%. The report also presents a range of the potential 2006 rate increase for your budget development considerations.

Please be sure to review "NYSHIP News", which has replaced the "Keeping You Informed" section of this quarterly report. It provides more detailed information on issues of importance to Participating Agencies.

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 2005
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 2005 Empire Plan Experience
• 2006 Projected Premium Rates

Exhibits

1. Projected 2005 Empire Plan Experience
2. 2006 Projected PA Premium Rates
3. Empire Plan PA 5-Tier Group Rates 1996-2006
4. Empire Plan PA 2-Tier Group Rates 1996-2006

• NYSHIP News

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NEW YORK STATE HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
2ND QUARTER REPORT

PROJECTED 2005 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $198.0 million (4.6% of premium), or $94.6 million more than the margin loaded in the 2005 rates. The 2005 annual experience projected by the insurance carriers is reported in Exhibit I.

This projection is based on only six months of 2005 paid claims data. The following chart presents the percentage of the projected incurred claims actually paid, as well as the current 2005 trend as compared to the trend assumed during the 2005 rate development:

	% of Actual Paid Claims to Projected Incurred Claims		Projected 2005 Trend
	2004	2005	@ Renewal	@ 2nd Quarter
Blue Cross	97.5%	35.7%	13.6%	12.0%
UnitedHealthcare	99.1%	39.0%	10.7%	10.2%
GHI	98.9%	37.0%	4.5%	4.6%
Cigna	100.0%	44.2%	17.6%	13.2%

The 2005 projected dividend for each carrier as compared to the margin level used in the 2005 premium development is as follows:

	Margin	2005 Projected Dividend/(Loss)	Increase/(Decrease)
Blue Cross	$23,043,000	$28,477,000	$5,434,000
UnitedHealthcare	$40,834,000	$36,184,000	$(4,650,000)
GHI	$2,423,000	$1,771,000	($652,000)
Cigna	$37,107,000	$131,576,000	$94,469,000
Total	$103,407,000	$198,008,000	$94,601,000

The increase in the dividend projection is primarily attributable to a reduction in the projected prescription drug trend coupled with an increase in savings attributable to the plan changes made effective January 1, 2005. The moderately higher dividends projected for the Blue Cross component is offset by a decrease in the projected GHI and UnitedHealthcare dividends. GHI’s decrease is attributable to a modest increase in the 2004 claim base and a slight increase in utilization during 2005. The majority of the projected dividend decrease/claim increase for UHC is attributable to a modest increase in the projected 2004 claim base.

 

2006 PROJECTED PREMIUM RATES

Exhibit II presents the projected 2006 Empire Plan gross and net premium rates assuming the application of $150.0 million in dividend to all payors. In aggregate, the Empire Plan gross premium is projected to increase approximately 9.9% while the net premium is projected to increase 8.6%.

A range of projected gross and net premium rates is also included (5.4% - 11.8%). Carrier rate projections made at this time of the year have been historically conservative with the rates ultimately approved and implemented being less than the projections contained in the Second Quarter Reports.
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.

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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

2005 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)	1,330,901	1,362,597	128,933	111,418	1,602,948	71,983	10,618	7,301	89,902	1,272,317	4,296,068
(B) Incurred Claims (2)	1,199,318	1,230,697	102,878	88,530	1,422,105	58,882	8,003	5,820	72,705	1,093,305		833.76	908.98	9.0%	819.48	879.73	7.4%
Pessimistic	833.76	931.41	11.7%	819.48	902.16	10.1%

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	748.32	5.3%	696.00	719.77	3.4%
Best Estimate	710.49	763.80	7.5%	696.00	735.25	5.6%
Pessimistic	710.49	778.93	19.6%	696.00	750.38	7.8%

(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	524.79	7.0%	478.49	510.49	6.7%
Best Estimate	490.41	541.40	10.4%	478.49	522.35	9.2%
Pessimistic	490.41	557.62	13.7%	478.49	543.32	13.5%

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	1,111.89	7.1%	1,013.68	1,081.79	6.7%
Best Estimate	1,038.64	1,147.10	10.4%	1,013.68	1,106.86	9.2%
Pessimistic	1,038.64	1,181.48	13.8%	1,013.68	1,151.38	13.6%

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	358.35	5.2%	331.93	344.78	3.9%
Best Estimate	340.50	365.90	7.5%	331.93	350.77	5.7%
Pessimistic	340.50	373.30	9.6%	331.93	359.73	8.4%

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	945.43	6.4%	867.09	916.09	5.7%
Best Estimate	888.71	971.60	9.3%	867.09	935.31	7.9%
Pessimistic	888.71	997.16	12.2%	867.09	967.82	11.6%

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	738.79	778.99	5.4%	720.53	750.38	4.1%
Best Estimate	738.79	796.09	7.8%	720.53	763.72	6.0%
Pessimistic	738.79	812.83	10.0%	720.53	784.22	8.8%

(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	541.40	10.4%	522.35	9.2%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.8%	9.5%
Most Recent 5 Years	10.7%	10.7%

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	1,147.10	10.4%	1,106.86	9.2%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.2%	8.8%
Most Recent 5 Years	11.2%	11.2%

(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	365.90	7.5%	350.77	5.7%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.8%	6.7%
Most Recent 5 Years	8.5%	8.1%

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	971.60	9.3%	935.31	7.9%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.7%	7.4%
Most Recent 5 Years	10.3%	10.2%

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	796.09	7.8%	763.72	6.0%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.4%	6.4%
Most Recent 5 Years	9.3%	8.9%

(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	476.27	9.8%	459.27	8.5%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.3%	8.3%
Most Recent 10 Years	8.1%	9.2%
Most Recent 5 Years	10.5%	10.4%

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	1,064.93	10.0%	1,027.21	8.7%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.6%	8.6%
Most Recent 10 Years	8.1%	9.2%
Most Recent 5 Years	10.7%	10.7%

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

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Second Quarter – 2005

Medicare Part D and Empire Plan Benefits

As you know, prescription drug coverage for individuals eligible for Medicare will become available effective January 1, 2006, under Medicare Part D. The Employee Benefits Division is committed to making the implementation of Medicare Part D as smooth as possible for both NYSHIP Participating Agencies and enrollees. We have been working closely to prepare for it with both our actuarial consultant and the Center for Medicare and Medicaid Services (CMS) regional coordinator. This will be a major topic at the 2005 PA Regional Meetings.

By early-October we will send Health Benefit Administrators a memo that provides detailed information about Medicare Part D. We also will be sending Medicare eligible enrollees and dependents a letter explaining how Medicare Part D relates to their Empire Plan prescription drug benefits. The following is a summary of the information that will be in the memo and letter:

• NYSHIP does NOT require Medicare eligible enrollees and dependents to join Medicare Part D for prescription drug coverage.
• Most Empire Plan enrollees and covered dependents should NOT join a Medicare Prescription Drug Plan for 2006.
• An Empire Plan enrollee or covered dependent eligible for Medicare should consider joining a Medicare prescription drug plan ONLY if he or she is approved for the extra help provided by the Medicare Part D Low Income Subsidy. Participating Agencies will have the option to allow enrollees eligible for the extra help to drop their NYSHIP Prescription Drug Coverage and pay a lower premium.
• Empire Plan enrollees and covered dependents eligible for Medicare in 2006 will continue to receive the full prescription drug benefits available under The Empire Plan provided they do not enroll in Part D.
• If an enrollee or dependent chooses to join a Medicare prescription drug plan their Empire Plan prescription drug coverage will become secondary. The Medicare prescription drug plan will be primary, or pay first for prescription drugs. As a result, out-of-pocket costs under the Empire Plan prescription drug coverage may then be higher and the enrollee must submit a claim form for reimbursement under their Empire Plan coverage.
• Participating Agencies will NOT be required to reimburse the monthly Medicare Part D premium for prescription drug coverage.

There are no changes in the NYSHIP rules for Medicare Part A which provides hospitalization coverage or Medicare Part B for medical coverage. Enrollees and dependents must be enrolled in Medicare Parts A and B when first eligible for Medicare primary coverage and Participating Agencies continue to be required to reimburse the Part B premium.

Medicare Part D Employer Subsidy

As you may be aware, the Federal legislation that created Medicare Part D also provides for a subsidy to employers who continue to provide prescription drug coverage that is as good as or better than the standard Medicare Part D benefit. Empire Plan coverage meets this requirement. Therefore, Participating Agencies who have Medicare eligible retirees who are not enrolled in Medicare Part D and who use their Empire Plan drug benefit will be eligible for this subsidy.

The Employee Benefits Division will be administering the Medicare Part D Retiree Drug Subsidy (RDS) for Participating Agencies – including filing the RDS application with CMS, submitting the required claims data to CMS and collecting and distributing any subsidy earned by each agency as a credit to their Empire Plan premium bill.
More details regarding how the subsidy will be administered will be provided in a separate communication to Participating Agency HBAs and CEOs.

Empire Plan Prescription Drug Program Contract Award

The Department’s current contract for the Empire Plan Prescription Drug Program ends on December 31, 2005. On February 10, 2005, the Department issued an RFP for that contract. As a result of the procurement process, the Department recently announced the selection of Empire Blue Cross Blue Shield in partnership with Caremark. The Department has entered into negotiations with Empire BCBS for the purpose of entering into a three-year contract to insure and administer the Program. We will be working closely with all parties to ensure a smooth transition for enrollees.

Medicare Part B Reimbursement

It has come to our attention that there may be some confusion with regards to the requirement that NYSHIP Participating Agencies reimburse Medicare-eligible retirees and covered dependents for the Medicare Part B premium. This mandate is established under Civil Service Law, Section 167-a. Reimbursement must be provided to Medicare-eligible retirees and dependent survivors, as well as their Medicare-eligible dependents. Agencies may determine the frequency of the reimbursement, provided it is made at least once per year. Reimbursement may be made through a pension check credit, or for those in direct pay status, through a credit to their premium bill. Details on Medicare and NYSHIP are included in Section 610 of the Manual for Participating Subdivisions.

Benefit Statements

The 2005 NYSHIP Empire Plan Benefit Statements were mailed to active employees and non-active (i.e., retirees, dependent survivors, etc.) enrollees of Participating Agencies in early-September. Please refer to PA Memo 05-11 (mailed on August 22, 2005) for details and instructions for handling corrections.

Past Due Premium Procedure

The Employee Benefits Division has been aggressively following up with agencies that fail to submit premium payments in a timely manner. This procedure includes suspension of claims for enrollees of any agency that falls three months behind in their premiums. To avoid disruption of your employees’ benefits, please be sure to submit your premium payments by the due date, as we must submit premium to the Empire Plan insurers on time.

Participating Agency Regional Meetings

The 2005 PA Regional Meetings have been scheduled as follows:

• October 3 (Monday) – Saratoga Springs
• October 5 (Wednesday) – Suffern
• October 6 (Thursday) – Long Island

The meeting notice was mailed to all PA CEOs and HBAs on August 25th. Please make every effort to attend, since the agenda will include discussion of the 2006 projected rates, Medicare Part D and other important policy issues. If you did not receive the meeting information, please e-mail Debbie D’Orazio at the address listed below.

NYSHIP Representation at Municipal Events

During the next quarter, NYSHIP’s Empire Plan will be represented at the following municipal events. If you are planning to attend an event, please stop by the NYSHIP exhibit:

• The 2005 Fall Seminar sponsored by the NYS Association of Counties, September 14-15, 2005, in Rochester, NY.
• The 2005 Fall Training School sponsored by the NYS Conference of Mayors, September 20-22, 2005, in Lake Placid, NY.
• The 2005 Annual Convention sponsored by the NYS School Boards’ Association, October 27-29, 2005, in Rochester, NY.

Transmission of Reports Electronically

Many agencies receive the Empire Plan Experience Report via E-mail. If you would like to be added to our distribution list, you may contact us at the address or E-mail below.

CEO and HBA Name and Address Changes

Please be sure to notify EBD of any changes in the names and/or addresses (including E-mail address) of your agency’s CEO or HBA, so that we may keep our mailing lists up-to-date. This updated information should be sent to:

Debbie D’Orazio
Employee Benefits Division
NYS Department of Civil Service
State Office Campus, Bldg. #1
Albany, NY 12239
or E-mail: dld2@cs.state.ny.us

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Report - PDF Version

Exhibits I - PDF Version

Exhibits II - PDF Version

Exhibits III - PDF Version

Exhibits IV - PDF Version

NYSHIP News - PDF Version