Department of Civil Service

PA06-06

TO: Participating Agency Health Benefit Administrators
FROM: Robert W. DuBois, Director of the Employee Benefits Division
SUBJECT: Empire Plan Quarterly Experience Report
DATE: March 21, 2006

Enclosed are the Fourth 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 2007 premium rates.

---

March 21, 2006

Dear Chief Executive Officer:

Attached is the Empire Plan Fourth Quarter Experience Report for 2005. This report presents the projected 2005 Empire Plan experience based on claims paid through December 31, 2005, as well as the projected 2007 premium rates.

The Empire Plan carriers project a 2005 net dividend of $260.0 million, 6.0% of premium. The report explains the basis for this projection. The 2005 experience statement was issued by the carriers on March 15, 2006.

The projected 2007 premium rates are presented in Exhibit II and reflect a "best estimated" net rate increase of 11.1%, in aggregate. The report also presents a range of the potential 2007 rate increase for your budget development considerations.

Please be sure to review the NYSHIP News Section of this report which provides more detailed information on issues of importance to Participating Agencies, including updates on both Medicare Part D and the Employer Subsidy.

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

OCTOBER – DECEMBER 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
• 2007 Approved Premium Rates

Exhibits

1. Projected 2005 Empire Plan Experience
2. Projected 2007 PA Premium Rates
3. Empire Plan PA 5-Tier Group Rates 1996-2007
4. Empire Plan PA 2-Tier Group Rates 1996-2007

• NYSHIP News

---

NEW YORK STATE HEALTH INSURANCE PROGRAM
PARTICIPATING AGENCY GROUP
EMPIRE PLAN EXPERIENCE REPORT
4th QUARTER REPORT

PROJECTED 2005 EMPIRE PLAN EXPERIENCE

The Empire Plan carriers project a composite dividend of $260.0 million (6.0% of premium), or $156.6 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 twelve 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	@ 4th Quarter
Blue Cross	98.9%	85.5%	13.6%	7.4%
UnitedHealthcare	99.8%	89.3%	10.7%	11.7%
GHI	99.7%	82.9%	4.5%	2.6%
Cigna	100.0%	97.4%	17.6%	6.2%

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	$83,396,000	$60,353,000
UnitedHealthcare	$40,834,000	$18,225,000	($22,609,000)
GHI	$2,423,000	$3,836,000	$1,413,000
Cigna	$37,107,000	$154,517,000	$117,410,000
Total	$103,407,000	$259,974,000	$156,567,000

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 increase in the projected dividend for the Blue Cross component is attributable to a decrease in the 2004 projected claim base and a moderate reduction in the 2005 trend. UHC is projecting a modest dividend; one that is less than the margin level used in the 2005 premium development. The modest dividend is due to an increase in the trend, as normalized for plan changes, partially offset by a decrease in the 2004 claim base. GHI’s dividend projection is slightly greater than the margin loaded into the 2005 rates and is attributable to a reduction in the trend.

2007 APPROVED PREMIUM RATES

Exhibit II presents the projected 2007 Empire Plan gross and net premium rates assuming the application of $220.8 million in dividend to all payors. In aggregate, the Empire Plan gross premium is projected to increase approximately 11.7% while the net premium is projected to increase approximately 11.1%.

A range of projected gross and net premium rates is also included (7.8%-14.4%). It should be noted that 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 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 2007.

---

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)	1,331,134	1,365,201	129,013	111,878	1,606,092	72,304	10,692	7,307	90,303	1,275,659	4,303,188
(B) Incurred Claims (2)	1,147,606	1,164,931	146,458	131,801	1,443,190	56,711	8,262	6,241	71,214	1,076,052	3,738,062
(C) Administrative Expense (3)	100,132	121,613	12,163	10,901	144,677	12,202	1,803	1,248	15,253	45,090	305,152
(D) Gain/(Loss) (A-B-C)	83,396	78,657	(29,608)	(30,824)	18,225	3,391	627	(182)	3,836	154,517	259,974

(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: Carriers 2005 4th Quarter Report

---

Exhibit II

Empire Plan
Participating Agency Premium Rates
Comparison of 2006 and Projected 2007 Rates

CORE ONLY

Plan Prime

	Gross Rates(1) 2006	Gross Rates(1) 2007(3)	Gross Rates(1) % Change	Net Rates(2) 2006	Net Rates(2) 2007(3)	Net Rates(2) % Change
Individual Optimistic	490.93	536.29	9.2%	472.92	511.92	8.2%
Individual Best Estimate	490.93	551.29	12.3%	472.92	526.92	11.4%
Individual Pessimistic	490.93	566.69	15.4%	472.92	542.32	14.7%
Family Optimistic	1,039.70	1,135.36	9.2%	1,001.94	1,083.91	8.2%
Family Best Estimate	1,039.70	1,166.98	12.2%	1,001.94	1,115.53	11.3%
Family Pessimistic	1,039.70	1,199.49	15.4%	1,001.94	1,148.04	14.6%

Mediprime

	Gross Rates(1) 2006	Gross Rates(1) 2007(3)	Gross Rates(1) % Change	Net Rates(2) 2006	Net Rates(2) 2007(3)	Net Rates(2) % Change
Individual Optimistic	344.41	382.47	11.1%	323.97	360.21	11.2%
Individual Best Estimate	344.41	391.19	13.6%	323.97	368.93	13.9%
Individual Pessimistic	344.41	400.04	16.2%	323.97	377.78	16.6%
Family-1 Optimistic	893.19	981.54	9.9%	852.99	932.17	9.3%
Family-1 Best Estimate	893.19	1,006.89	12.7%	852.99	957.52	12.3%
Family-1 Pessimistic	893.19	1,032.82	15.6%	852.99	983.45	15.3%
Family-2 Optimistic	746.68	827.72	10.9%	704.04	780.47	10.9%
Family-2 Best Estimate	746.68	846.79	13.4%	704.04	799.54	13.6%
Family-2 Pessimistic	746.68	866.18	16.0%	704.04	818.93	16.3%

 

CORE PLUS MEDICAL & PSYCHIATRIC ENHANCEMENTS

Plan Prime

	Gross Rates(1) 2006	Gross Rates(1) 2007(3)	Gross Rates(1) % Change	Net Rates(2) 2006	Net Rates(2) 2007(3)	Net Rates(2) % Change
Individual Optimistic	547.86	591.13	7.9%	529.76	566.69	7.0%
Individual Best Estimate	547.86	609.02	11.2%	529.76	584.58	10.3%
Individual Pessimistic	547.86	627.31	14.5%	529.76	602.87	13.8%
Family Optimistic	1,164.16	1,225.25	7.8%	1,126.19	1,203.65	6.9%
Family Best Estimate	1,164.16	1,293.18	11.1%	1,126.19	1,241.58	10.2%
Family Pessimistic	1,164.16	1,332.00	14.4%	1,126.19	1,280.40	13.7%

 

Mediprime

	Gross Rates(1) 2006	Gross Rates(1) 2007(3)	Gross Rates(1) % Change	Net Rates(2) 2006	Net Rates(2) 2007(3)	Net Rates(2) % Change
Individual Optimistic	359.35	396.86	10.4%	338.88	374.58	10.5%
Individual Best Estimate	359.35	406.35	13.1%	338.88	384.07	13.3%
Individual Pessimistic	359.35	415.95	15.8%	338.88	393.67	16.2%
Family-1 Optimistic	975.66	1,060.98	8.7%	935.32	1,011.51	8.1%
Family-1 Best Estimate	975.66	1,090.51	11.8%	935.32	1,041.04	11.3%
Family-1 Pessimistic	975.66	1,120.63	14.9%	935.32	1,071.16	14.5%
Family-2 Optimistic	787.16	866.72	10.1%	744.45	819.42	10.1%
Family-2 Best Estimate	787.16	887.84	12.8%	744.45	840.54	12.9%
Family-2 Pessimistic	787.16	909.28	15.5%	744.45	861.98	15.8%

 

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

 

---

Exhibit III

EMPIRE PLAN
PA 5 TIER GROUP RATES
1996-2007 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%
2007 Projected	609.02	11.2%	584.58	10.3%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	9.1%	9.7%
Most Recent 5 Years	11.5%	11.2%

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%
2007 Projected	1,293.18	11.1%	1,241.58	10.2%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	8.5%	9.1%
Most Recent 5 Years	11.7%	11.4%

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%
2007 Projected	406.35	13.1%	384.07	13.3%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	6.2%	6.9%
Most Recent 5 Years	9.5%	8.9%

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	975.66	9.8%	935.32	7.9%
2007 Projected	1,090.51	11.8	1,041.04	11.3%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	7.2%	7.7%
Most Recent 5 Years	11.0%	10.5%

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	787.16	6.5%	744.45	3.3%
2007 Projected	887.84	12.8%	840.54	12.9%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception of 5 Tier Structure (1996)	5.9%	6.7%
Most Recent 5 Years	10.0%	9.3%

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

---

Exhibit IV

EMPIRE PLAN
PA 2 TIER GROUP RATES
1996-2007 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	477.33	10.1%	459.25	8.5%
2007 Projected	533.50	11.8%	510.30	11.1%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.4%	8.4%
Most Recent 10 Years	9.3%	10.0%
Most Recent 5 Years	11.2%	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%
2006	1,073.28	10.8%	1,034.40	9.4%
2007 Projected	1,198.78	11.7%	1,148.19	11.0%

Average Percent Increase

	Gross Rate % Change	Net Rate % Change
From Inception (1986)	8.8%	8.8%
Most Recent 10 Years	9.3%	9.9%
Most Recent 5 Years	11.3%	10.9%

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

---

Fourth Quarter – 2005

Medicare Part D and Empire Plan Benefits

The Employee Benefits Division continues to work with the Centers for Medicare and Medicaid Services (CMS) on issues and procedures related to the implementation of Medicare Part D.

The Division has begun sending letters to all NYSHIP enrollees who have either signed-up or attempted to sign-up for Medicare Part D. These enrollees are being reminded that NYSHIP is creditable coverage and that it is only in their best interest to sign-up for Part D if they are eligible for the Low Income Subsidy. Remember, your agency is not eligible for a subsidy for anyone who does enroll in Medicare Part D.

The letter also instructs the enrollee to contact his or her former employer if the enrollee is eligible for the Low Income Subsidy and wants to drop the Empire Plan Prescription Drug coverage. We will require that these Part D enrollees who request this change in coverage send a copy of their Low Income Subsidy award letter to their former employer. If you receive any, you then must send a copy to us to verify eligibility for the no-drug coverage.

On January 4, 2006, PA Memo 06-01, which contains details about changes made to our enrollment and accounting systems (NYBEAS) was sent to all Health Benefit Administrators. NYBEAS will track each member enrolled in Medicare Part D and/or those identified as Low Income Subsidy eligible. Included with the memo were error reports for each agency based on information received from CMS. These reports list enrollees who were "rejected" in our match with CMS. Any individual appearing on these reports will not be deemed subsidy-eligible until the enrollment records are corrected and a match is received from CMS. Therefore, to maximize your subsidy payment, we recommend that you make every effort to correct any errors in these records.

Medicare Part D Employer Subsidy

CMS is substantially behind schedule in their implementation of the retiree drug subsidy (RDS) for employers. Recently, we received notification from CMS that they expect to be ready to accept payment requests starting July 1, 2006. Although the Employee Benefits Division is ready to submit prescription cost data and payment requests at present, there is not an operational system in place at CMS to receive such data. The original plan called for this process to begin in January.

At this time, we expect that the first subsidy payment to Participating Agencies will not be made until the September billing. We are committed to relaying the subsidy to Participating Agencies as soon as possible, if a scheduled payment can be made earlier by CMS. For more information on specific details of the Part D subsidy, please refer to PA Memo 05-22, dated September 30, 2005.

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 NYS Government Finance Officers Association’s Annual Conference -
  April 5-7, in Albany.
• The 2006 Local Government Conference sponsored by the NYS Tug Hill Commission –
  March 30, 2006 in Watertown.

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
Albany, NY 12239
or E-mail: Deborah.Dorazio@cs.state.ny.us

---

Report – PDF Version

Exhibits I – PDF Version

Exhibits II – PDF Version

Exhibits III – PDF Version

Exhibits IV – PDF Version

NYSHIP News – PDF Version