CalPERS Achieves Large Savings Through Health Benefit Changes
CalPERS reduced costs by nearly $1 billion in 2010, with most of the savings coming from changes to its health benefits program, according to a staff report, the Sacramento Business Journal reports.
CalPERS CEO Anne Stausboll said the cost reductions reflect the pension system's efforts to comply with a state mandate requiring agencies to operate more efficiently.
Cost Reductions
According to the staff report, CalPERS achieved about $600 million of the cost reductions through changes to its health benefits program. For example, the pension fund:
- Expanded two low-cost, high-performance health plans;
- Increased its focus on health and disease management; and
- Removed more expensive hospitals from its network.
CalPERS also recently launched a Sacramento-area pilot program designed to cut costs by improving data sharing and care coordination. The pilot program also involves Blue Shield of California, Catholic Healthcare West and Hill Physicians Medical Group.
In addition to the health-related savings, CalPERS cut about $357 million in costs in 2010 by reducing management fees paid to investment managers and partners.
Future Projections
According to Stausboll, CalPERS aims to cut costs by about $287 million in 2011. Some of the expected savings stem from the federal government's agreement to pay $200 million to offset the costs of providing health coverage for younger retirees.
Stausboll said CalPERS' health benefits program expects to cut costs by an additional $82 million this year through other program efficiencies (Robertson, Sacramento Business Journal, 5/24).
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