Department of Civil Service

PA05-28

TO: Participating Agency Health Benefit Administrators
FROM: Robert W. DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: December 30, 2005

Enclosed are the Third 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 approved 2006 premium rates.

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December 30, 2005

Dear Chief Executive Officer:

Attached is the Empire Plan Third Quarter Experience Report for 2005. This report presents the projected 2005 Empire Plan experience based on claims paid through September 30, 2005, as well as the approved 2006 premium rates.

For Plan Year 2005, the Empire Plan carriers project a net dividend of $239.7 million, 5.6% of premium. The report explains the basis for this projection and future reports will include revisions based on additional claims experience. The approved 2006 premium rates are presented in Exhibit II and reflect a net rate increase of 9.2%, in aggregate.

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 both informative and useful to you. If you have any questions, comments or suggestions, please don’t hesitate to contact me. 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

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EMPIRE PLAN EXPERIENCE REPORT

JULY – SEPTEMBER 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 Premium Rates

Exhibits

1. Projected 2005 Empire Plan Experience
2. 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

• NYSHIP News

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NEW YORK STATE HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
3RD QUARTER REPORT

PROJECTED 2005 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $239.7 million (5.6% of premium), or $136.3 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 nine 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	@ 3rd Quarter
Blue Cross	98.7%	59.7%	13.6%	12.0%
UnitedHealthcare	99.7%	64.9%	10.7%	10.2%
GHI	99.5%	58.4%	4.5%	4.3%
Cigna	100.0%	63.4%	17.6%	10.0%

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	$53,460,000	$30,417,000
UnitedHealthcare	$40,834,000	$45,074,000	$4,240,000
GHI	$2,423,000	$2,885,000	$462,000
Cigna	$37,107,000	$138,275,000	$101,168,000
Total	$103,407,000	$239,694,000	$136,287,000

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 dividend projected for the Blue Cross component is attributable to a decrease in the 2004 projected claim base and a modest reduction in the 2005 trend. UHC’s modest increase in the projected dividend is also due to a slight reduction in both the 2004 claim base and 2005 trend. GHI’s dividend projection is consistent with the margin loaded into the 2005 rates.

2006 APPROVED PREMIUM RATES

Exhibit II presents the approved 2006 Empire Plan gross and net premium rates. In aggregate, the Empire Plan gross premium increases 10.7% while the net premium increases 9.2%. The 2006 rates are based on a 2005 premium level generating a 5.6% dividend, an aggregate trend of 13.0%, a margin level equal to 2.1% of premium and a 17.4% increase in retention. Approximately 9% of this increase in retention is attributable to the amounts proposed by the selected prescription drug vendor over the 2005 projected expenses. In addition, $246.4 million in all-payor dividend was used to mitigate the gross premium increase.

Also contributing to this favorable rate increase is the use of retrospective premium arrangements. 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. The amount of the retro payment is capped at the difference between the original premium requested and the reduced premium level paid throughout the year. This strategy is used when we believe the carriers’ premium demand is overly conservative. Any necessary retrospective premium payment would be funded through available dividends. While the retro premium liability is approximately $121.4 million, the State and its benefit consultant, Buck Consultants, 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 Enhancements option based on the five-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 2006.

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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)	1,331,600	1,365,608	129,263	111,621	1,606,492	72,140	10,665	7,296	90,101	1,274,679	4,302,872
(B) Incurred Claims (2)	1,176,589	1,145,300	142,665	128,612	1,416,577	58,251	7,905	5,750	71,906	1,090,126	3,755,198
(C) Administrative Expense (3)	101,551	123,053	11,509	10,279	144,841	12,272	1,799	1,239	15,310	46,278	307,980
(D) Gain/(Loss) (A-B-C)	53,460	97,255	(24,911)	(27,270)	45,074	1,617	961	307	2,885	138,275	239,694

(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 2005 3rd Quarter Report

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Exhibit II

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

CORE ONLY

Plan Prime

	Gross Rates(1) 2005	Gross Rates(1) 2006	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006	Net Rates(2) % Change
Individual (81)	453.01	490.93	8.4%	446.36	472.92	6.0%
Family (82)	957.03	1,039.70	8.6%	942.99	1,001.94	6.3%

Medprime

	Gross Rates(1) 2005	Gross Rates(1) 2006	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006	Net Rates(2) % Change
Individual	329.75	344.41	4.4%	322.87	323.97	0.3%
Family - 1 medicare	833.76	893.19	7.1%	819.48	852.99	4.1%
Family - 2 medicares	710.49	746.68	5.1%	696.00	704.04	1.2%

CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

Plan Prime

	Gross Rates(1) 2005	Gross Rates(1) 2006	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006	Net Rates(2) % Change
Individual (71)	490.41	547.86	11.7%	478.49	529.76	10.7%
Family (72)	1,038.64	1,164.16	12.1%	1,013.68	1,126.19	11.1%

Medprime

	Gross Rates(1) 2005	Gross Rates(1) 2006	Gross Rates(1) % Change	Net Rates(2) 2005	Net Rates(2) 2006	Net Rates(2) % Change
Individual	340.50	359.35	5.5%	3331.93	338.88	2.1%
Family - 1 medicare	888.71	975.66	9.8%	867.09	935.32	7.9%
Family - 2 medicares	738.79	787.16	6.5%	720.53	744.45	3.3%

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

 

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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	547.86	11.7%	529.76	10.7%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.9%	9.6%
Most Recent 5 Years	11.0%	11.0%

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	1,164.16	12.1%	1,126.19	11.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.3%	9.0%
Most Recent 5 Years	11.6%	11.6%

(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	359.35	5.5%	338.88	2.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.6%	6.4%
Most Recent 5 Years	8.1%	7.3%

Family - 1 Medprime

Year	Gross Rate (1)	% Change	Net Rate (2)	% Change
1996 (3)	446.03	-8.4%	383.23	-13.0%
From Inception (1986)	8.3%	8.3%
Most Recent 10 Years	8.2%	9.2%
Most Recent 5 Years	10.6%	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	1,073.28	10.8%	1,034.40	9.4%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.7%	8.6%
Most Recent 10 Years	8.2%	9.3%
Most Recent 5 Years	10.9%	10.8%

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

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Third Quarter – 2005

Medicare Part D and Empire Plan Benefits

As reported in the previous Quarterly Report, 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.

On September 30, 2005, PA05-22, which contains detailed information about Medicare Part D, was sent to Chief Executive Officers and Health Benefit Administrators. In July and again in September, all Medicare enrollees and dependents received a letter explaining how Medicare Part D relates to their Empire Plan prescription drug benefits. A notice of Creditable Coverage was included in the September mailing to enrollees. A re-cap of some important highlights include:

• 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.
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• 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.

Medicare Part D Employer Subsidy

As discussed in the last Quarterly Report, the Federal legislation that created Medicare Part D also provides for a Retiree Drug Subsidy (RDS) 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 that 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.

Specific details about the Medicare Part D subsidy were included in our September 30, 2005, PA05-22. The subsidy will pay 28% of the allowable retiree costs attributable to gross covered prescription drug costs. For 2006, the subsidy will apply to covered costs above $250 (the Medicare Part D deductible) and up to $5,000 (the Medicare Part D cost limit). The subsidy will be paid only for retirees not enrolled in Medicare Part D.

The subsidy earned by Participating Agencies will be based on the actual claims experience of its Medicare enrollees. Beginning in February 2006 the Department of Civil Service will submit prescription drug claims data to the Centers for Medicare and Medicaid (CMS) on a monthly basis. We expect to receive monthly subsidy payments beginning in March, or soon thereafter. The Department is planning to reimburse Participating Agencies that qualify for the subsidy through a credit to the monthly NYSHIP bill. It is our understanding that the monthly subsidy amounts paid by CMS will be estimated, with reconciliation done after the end of the year. Although we can not predict the exact amount of the subsidy for each Agency, CMS projects that an average employer offering drug coverage can expect to earn $668 per individual in 2006.

The purpose of the subsidy is to reduce the cost to employers of continuing to provide the current level of prescription drug coverage to its Medicare eligible retirees; however, an employer may use the subsidy amount received as it sees fit.

Empire Plan Prescription Drug Program Updates

As previously announced, the Department recently entered into a three year contract with Empire Blue Cross Blue Shield in partnership with Caremark. An Empire Plan Special Report was mailed in November to all NYSHIP enrollees and Participating Agencies to highlight changes effective January 1, 2006:

• There will be some changes to the Preferred Drug List as part of The Empire Plan annual review. Pages 3-6 of the Special Report highlight the most commonly prescribed generic and brand-name drugs included on the 2006 Empire Plan Preferred Drug List. This list is not a complete list. For specific questions, please direct enrollees to call The Empire Plan at 1-877-7-NYSHIP and select The Empire Plan Prescription Drug Program.
• Prescription drug benefits are not changing, and enrollees will not need a new identification card to fill prescriptions. It is recommended that enrollees take the card printed on the last page of the Special Report to participating retail pharmacies when filling their first prescription in 2006, simply to ensure that participating pharmacies are aware of the change in administrators.
• The majority of the Plan’s current network pharmacies will participate in the Caremark/Empire Plan network, including most retail chain pharmacies. To find a participating pharmacy enrollees may: call the pharmacy and ask if they will participate, check the Department of Civil Service web site at https://www.cs.ny.gov (click on Employee Benefits, then Empire Plan Providers, Pharmacies and Services), or call The Empire Plan at 1-877-7-NYSHIP.
• Enrollees currently using the ExpressScripts Mail Service Pharmacy and have refills available will be automatically transferred to the Caremark Mail Service Pharmacy as of January 1, 2006. An exception will be for compound drugs and controlled substances; these will require a new prescription from the enrollee’s doctor.
• Enrollees should not begin sending prescriptions to the Caremark Mail Service Pharmacy until December 28, 2005. The address is: Caremark, P.O. Box 3223, Wilkes-Barre, PA 18773-3223.
• Written appeals, grievances, prior authorization documentation and general correspondence should be mailed to: The Empire Plan, Prescription Drug Program, P.O. Box 11826, Albany, NY 12211.

Please encourage enrollees to carefully review the Special Report for further details.

2006 New York State Health Insurance Rates & Option Transfer Period

On November 18, premium rates that become effective on January 1, 2006 were mailed to Participating Agencies (PA05-26). Also, information on the Annual Option Transfer Period was mailed on the same day in a separate memo, PA05-27. This year’s Option Transfer Period began on November 10, 2005 and ended on December 16, 2005.

Participating Agency Regional Meetings

The PA Regional Meetings, held during the first week of October, in Saratoga, Rockland and Suffolk counties, were an overwhelming success. More than 500 PA CEO’s and Health Benefits Administrators attended and received a comprehensive briefing on Medicare Part D and the Employer Subsidy. The agenda and meeting materials are posted on the Department website https://www.cs.ny.gov.

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 2006 Legislative Conference sponsored by the NYS Association of Counties, to be held January 30 – February 1, 2006 in Albany.
• The 2006 NYS Association of Towns Annual Meeting and Training School,to be held February 19-22, in New York City.

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:

Ms. Debbie D’Orazio
Employee Benefits Division
NYS Department of Civil Service
State Office Campus, Bldg. #1, Rm. 159
Albany, NY 12239
or E-mail: dld2@cs.ny.gov

Attachments:

Report - PDF Version
Exhibits I - PDF Version
Exhibits II - PDF Version
Exhibits III - PDF Version
Exhibits IV - PDF Version
NYSHIP News - PDF Version