CalPERS Considers Major Overhaul to Reduce Number of HMOs in Health Program
CalPERS is contemplating a "radical overhaul" of its health benefits program, possibly offering just a single statewide self-insured plan or only two or three HMOs, the Sacramento Bee reports. CalPERS formerly was able to "command good rates" from managed care companies by using the market power of its 1.2 million members, but the system now "admit[s]" that it cannot "hold down skyrocketing health care costs." Last year CalPERS saw average premium increases of 9.2%, smaller than the hikes most employers experienced but a "far cry from the mid-1990s when CalPERS commanded premium decreases." In response, the system last year increased out-of-pocket fees for members and reduced the number of HMO options. Now it is looking to take these savings further by improving the "quality and stability" of care. "The emphasis of a lot of large purchasers these days is making sure we get value, and sometimes that does mean eliminating choice," Allen Feezor, CalPERS' health benefits administrator, said. The Bee reports that the proposed changes, which CalPERS will discuss over the next six months for possible implementation in 2003, are "not without risk." Although a single self-insured plan would "eliminate the instability and costs associated with HMOs exiting counties," it would also force CalPERS to "assume all financial and legal risk." In addition, CalPERS "would have no guarantee" of better rates from providers than its HMOs currently offer. In addition, a move to two or three HMOs could be "challeng[ing]," because no California HMO currently offers a statewide network of hospitals and doctors. For either option, the "biggest hurdle" for both proposals could be "persuading members to accept ... fewer health plan choices," according to Barbara Adachi, a regional managing director for Deloitte & Touche. "CalPERS needs to act now to avoid further deterioration in its plans. There's an understanding that it will take time, but we already know that the market will not be able to solve the problems CalPERS faces," she said (Rapaport, Sacramento Bee, 2/21).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.