CalPERS Health Benefits Committee Approves 16.6% Health Insurance Premium Increase

The health benefits committee of the CalPERS, the nation's second-largest health care purchaser, yesterday approved a 16.6% increase in health insurance premiums for 2004, the Los Angeles Times reports. The cost increases would affect CalPERS' 1.2 million members, which include employees at state agencies, public schools and police departments, according to the Times (Vrana/White, Los Angeles Times, 6/18). In a 7-2 vote, the committee approved a proposal that would increase some copayments to prevent even higher premium increases, the Contra Costa Times reports (Silber, Contra Costa Times, 6/18). Without the increased copays, the average premium increase would have been 18.4%, the Sacramento Bee reports (Rapaport, Sacramento Bee, 6/18). For members enrolled in Kaiser Permanente health plans, prescription drug copays would increase from $5 to $10 for generics and from $15 to $20 for brand-name drugs. All other plans' copays would increase from about $30 to $45 for brand-name medications. In addition, emergency room copays would increase to $75 for all plans. The committee rejected the addition of a $250 fee for each hospital admission and a $100 copay for each outpatient surgery. Blue Shield of California, Kaiser and Western Health Advantage -- the fund's main insurers -- had initially proposed a 31% premium increase (Colliver, San Francisco Chronicle, 6/18). CalPERS spokesperson Clark McKinley said the system had reduced the premium increase in part through a multi-year contract with Blue Shield, reducing the number of HMOs from five to three and negotiating only after obtaining recent information on actual spending, McKinley said (Freudenheim, New York Times, 6/18). The CalPERS board is expected to vote on the plan today.

The California State Employees Association, the largest union in CalPERS, does not support the increases (San Francisco Chronicle, 6/18). Some public agencies are threatening to withdraw from the system, which could leave CalPERS members facing even larger rate increases in the future, according to the Los Angeles Times. Although CalPERS for many years used its large size to bargain for lower rates, an aging membership and rising medical costs have "left it with little ability at the negotiating table," the Los Angeles Times reports. A Goldman Sachs report released this week said, "CalPERS may begin to dissolve" (Los Angeles Times, 6/18). Although CalPERS increases have been viewed as an indicator of national rates, analysts said average employer increases would likely be about 12% in 2004 (New York Times, 6/18).