TO:                 Executive Board and Council Leaders

FROM:           Lorraine Simpkins, Health Benefits Specialist
DATE:            November 30, 2009
RE:                 2010 Empire Plan & HMO Premium Rates/Option Transfer Period

The Empire Plan and HMO premium rates for the year 2010 have been approved and were distributed to state agencies on 11/25/09.  Pursuant to the authority established in NYS Insurance Law Section 4235 (j) (1), (2) and (3), Empire Plan premiums are adjusted annually based on the projected use of medical services by enrollees and the cost of those services. The PEF/NYS contract does not give PEF authority to negotiate premium rates.

The 2010 Empire Plan premium rates are given below. HMO rates are here.

Factors contributing to this favorable rate action

Given the fiscal challenges currently faced by the State and its localities, the State’s objective was to develop 2010 Empire Plan premium rates that are as low as possible without generating substantial rate “spikes” in subsequent years.  To accomplish this objective, the NYS Department of Civil Service (DCS) aggressively negotiated for premium reductions with the insurers, and used both retrospective premium agreements with the insurers and application of dividend to offset the proposed rate increases.

·         Negotiated Reductions in Premium Demands

Negotiated premium reductions of approximately $225.7 million from the carriers' original premium renewal requests were made as a result of discussions between the insurers, the DCS and DCS’s benefit consulting firm.

·         Retrospective Premium Arrangements

Further reductions were achieved by removing the margin from the premium and negotiating retrospective premium arrangements. This strategy is intended to ensure that the level of dividends that are ultimately generated are kept to a minimum. If, at the end of the year, the actual claims and expenses exceed the amount of the paid premium, a retrospective premium payment will be made to the insurer(s) by the Plan from available dividend in the Health Insurance Fund. DCS does not expect that any significant retrospective premium payment will be necessary.

·         Application of Dividend

Premium above what is necessary to pay claims in any given year is returned to the Plan as a dividend and, consistent with State Law, is deposited in the Health Insurance Fund and used as a premium stabilization reserve. Funds from this reserve are applied each year to reduce the Plan's premiums. The 2010 Empire Plan premiums include a dividend credit of $410 million.  An audit by the NYS Office of the State Comptroller released on 9/22/09 was critical of DCS’s management of the premium stabilization reserve and recommended that DCS return up to $600 million in accumulated dividends to State and local government employers, and employees, in the form of reduced monthly premiums for 2010.  DCS did not believe it was appropriate to apply $600 million in case the additional funds are needed to prevent premium “spikes” in future years.

HMO Premium Rates

Neither PEF nor the State has the authority to negotiate HMO premiums, which are community rated. Community rating means all enrollees in an HMO are pooled and charged the same premium for the same benefits. The HMO premium cap limits the state's contribution to HMO premiums to an amount no greater than the cost of the Empire Plan hospital/medical/mental health and substance abuse premiums. Any amount of HMO premium greater than the Empire Plan’s for these components must be paid in full by the employee.

This year especially, the efforts of DCS to minimize the Empire Plan premium rate increases including the application of dividend, resulted in the vast majority of HMO premium rates exceeding the HMO premium cap, in many cases, by a substantial amount.  The Individual premium rates of eighteen (18) of the twenty (20) HMO options exceeded the premium cap; the Family premium rates of nineteen (19) of the twenty (20) exceeded the premium cap.  Since the employee has to pay 100% of the amount exceeding the cap, their biweekly premium deduction for 2010 may be significantly higher.

Only one (1) of the twenty (20) HMO options (Blue Choice) has a biweekly premium deduction that is less than the Empire Plan biweekly premium deduction of $99.60 for family coverage; eight (8) HMO options (CDPHP-Central & Southern Tier, CDPHP-Orange/Ulster, Community Blue, GHI-Capital District, HMOBlue-Central NY, HMOBlue-Utica, MVP-Mid Hudson, and MVP-North) will have a biweekly deduction for family coverage that exceeds $200; three (3) HMO options (Empire BCBS- Upstate, Empire BCBS-Downstate, and GHI-Hudson Valley) will have a biweekly deduction for family coverage that exceeds $300; and two (2) HMO options (Aetna and Empire BCBS-Mid Hudson) will have a biweekly deduction for family coverage that exceeds $400.  We ask that you remind members to check their health plan rates now to avoid an unpleasant surprise in their first bi-weekly paycheck with the new deductions.

It is important to look at more than premium contributions and copayments when selecting or remaining with an HMO. By now, all members enrolled in an HMO should have received side-by-side comparisons illustrating any benefit changes their HMOs will implement for plan year 2010. PEF does not negotiate the level of benefits provided by each HMO. HMOs can change their benefits from year to year and many do.

Changing Health Plan Options

Under the terms of the PEF/NYS contract, members have a minimum of 30 calendar days to change health plans after the rates are distributed to the agencies. The option transfer period will run through December 31, 2009. If anyone is considering changing health plans they should consider their options now.  The earliest paycheck in which a deduction change will be made is the check of January 6, 2010 for Administration Lag Payroll employees and December 31, 2009 for Institution Lag Payroll employees.  Members electing to change health plan options by the December 31^st deadline will be enrolled in the new health plan option effective 1/7/10 for Administration Lag Payroll employees and 12/31/09 for Institution Payroll employees.

The NYS Department of Civil Service (DCS) began mailing the NYSHIP Rates and Deadlines for 2010 flyer directly to employees' homes on November 25, 2009.  Members can get option transfer information, including the rates, from their agency health benefits administrator (HBA), who is usually located in the Human Resources office. This information is also available on the DCS web site at www.cs.state.ny.us. Scroll down the sidebar on the left, click on “Benefit Programs” and follow the instructions to access “NYSHIP Online.” Then, click on “Health Benefits and Option Transfer.” Employees can download, print and complete the PS-404 form required to change health plan options, and then bring it to their HBA for processing on or before 12/31/09. Members may also change health plan options online using the MyNYSHIP employee self-service website.

Additional Information

Please share this information with your members. Members who have questions about the rates may call Lorraine Simpkins at 1-800-342-4306 or 518-785-1900 ext. 283.

cc:  Roger Scales, Director of Labor Relations

Robert Carrothers, Director of Contract Administration

PEF Staff