CalPERS Cuts Losses in Self-Funded Plans, But Still Considering a Single Statewide Program
CalPERS announced this week that it lost $6.3 million on its self-funded health plans last year, down from a $74.5 million loss in 2000 when "soaring hospital and pharmaceutical costs outstripped premium income in the two plans," the Sacramento Bee reports. Despite this improvement, the program's trustees continue to consider "drastic changes" to CalPERS' benefits to contain rising health care costs. In response to growing financial risk in its self-insured plans -- a result of "sicker, costlier patients flock[ing]" to them as HMOs exit outlying counties and some unions with healthier members "shop for coverage outside CalPERS" -- the program is considering dropping all of its managed care contracts and switching to a single statewide self-insured plan. If CalPERS adopted such a plan, it would be able to pool patients with high health costs with a larger group of those in good health to help contain medical costs "over the long haul," according to Josh Raskin, a managed care analyst with Lehman Brothers. But if health costs or use of services increased, CalPERS would be "stuck" with the costs. Any decision on dropping HMOs in the pension fund will likely be linked to rates that insurers request during the program's upcoming annual contract negotiations, Raskin said. "If we have a further consolidation of our HMO choices after we do contracts, then the self-insured plans may have to absorb more people, and we might have to rethink how they work," CalPERS health benefits administrator Allen Feezor said. The Bee reports that any decision would not come without "months of study and discussion," and CalPERS has said that an overhaul would not take place before 2003 (Rapaport, Sacramento Bee, 3/21).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.