This fall, CalPERS likely will rebid its health insurance contracts in an attempt to curb rising health care costs, the Los Angeles Times reports (Terhune, Los Angeles Times, 6/28).
Earlier this month, the CalPERS board of administration approved a plan to raise health insurance premiums by an average of 9.6% next year for 1.3 million public employees, retirees and their families.
The 9.6% hike in health insurance premiums is one of the largest increases in recent years and more than twice the 4.1% premium increase that took effect this year.
Health insurance premiums will increase by:
- 13.9% for PPO plans; and
- 8.7% for HMO plans.
Rates will decrease by an average of 10.5% for Medicare plans, according to CalPERS.
The rate increases will cost members an average of $30 more per month.
The new rates will take effect Jan. 1, 2013 (California Healthline, 6/14).
Ann Boyton -- deputy executive officer for benefits at CalPERS -- said the agency is seeking new strategies in its next round of contract negotiations. She said, "We continue to see that our members' health does not improve in a significant way, and we have continual increases in our cost trend."
Considering New Contracts
CalPERS currently contracts with the state's three largest insurers:
- Blue Shield of California; and
- Kaiser Permanente.
The contracts expire in December 2013.
The agency said it intends to renew its HMO contract with Kaiser. According to experts, CalPERS is reluctant to stop contracting with Kaiser because the insurer operates its own hospitals and physician practices and CalPERS does not want to force patients to switch physicians.
However, CalPERS sent out a request for information to the health care industry this year, and a dozen health plans and physicians groups responded.
Large insurers that responded include:
- Cigna; and
- UnitedHealth Group.
In addition, regional insurers such as Sharp Health Plan in San Diego and medical groups such as the California Association of Physician Groups also responded to the request.
Boynton said that CalPERS is open to working directly with large medical groups. However, she said that they would have to manage many of the administrative functions that insurers typically handle.
According to the Times, this could put large medical groups in direct competition with insurers they are working with currently.
Blue Shield said CalPERS should not split its membership among regional health plans. In response to CalPERS' request for information, the insurer said, "It is critical that CalPERS continue its strategy of maximizing its purchasing clout with providers by consolidating its large membership pool among a few plans."
Other Cost-Saving Efforts
CalPERS has launched other initiatives to curb health care costs and improve patients' health, including:
- Removing certain higher-cost hospitals from its insurance networks;
- Directing members to lower-cost surgery centers for certain procedures; and
- Encouraging members to use generic prescription drugs.
The agency also has used an integrated approach to treating patients in rural counties in the northern part of the state, where Blue Shield worked with the Hill Physicians Medical Group and Dignity Health to closely manage about 40,000 CalPERS patients. Together, the groups saved about $37 million over the last two years.
CalPERS is expanding the integrated care strategy to Los Angeles, Orange and Santa Cruz counties.
CalPERS' Decisions Under Close Watch
According to the Times, other employers and health care companies are watching CalPERS' actions closely.
Donald Crane -- CEO of the California Association of Physician Groups -- said, "CalPERS is a bellwether by virtue of its sheer size, and people will follow what it does." He added, "There is no mistaking they want a new version of health care" (Los Angeles Times, 6/28).