CalPERS ‘HMO Scramble’ May Signal ‘Tremendous Turbulence’ in California’s Managed Care System

The California Public Employees Retirement System faces the "biggest HMO scramble in recent memory," forcing about 150,000 of the system's 1.2 million enrollees to switch health plans for 2002, the Los Angeles Times reports. According to experts, the shifts "signal tremendous turbulence in California's managed care marketplace." This year, CalPERS dropped four of the system's 10 HMOs -- Aetna, Cigna, Lifeguard and Maxicare -- which affected 121,000 individuals and marked the first time CalPERS has dropped an HMO since the 1980s. Several insurers -- including Blue Shield, PacifiCare and Health Net -- also plan to leave rural areas of the state, which will affect 25,000 CalPERS enrollees, while up to 25,000 state employees will "voluntarily switch plans for personal reasons." On average, between 20,000 and 30,000 CalPERS enrollees switch health plans each year, but that rate is expected to jump five-fold this fall. "Any time we make changes from what we're used to having, it causes a lot of anxiety," Allen Feezor, who heads CalPERS' health division, said, adding, "I think there will be a lot of initial discomfort and irritation." Feezor said that this year may represent the "beginning of a prolonged transitional period," adding that CalPERS may "reevaluate its dependence" on HMOs. "The health plans need me a hell of a lot more than I need them. If HMOs are not able to serve our people, we need to find other meaningful choices for them," he said.

Health benefits consultants said that the shifts for CalPERS, the nation's largest public purchaser of health insurance after the federal government, may represent the "beginning of a trend" in which employers drop health plans that "steeply hike prices" or offer "inferior service." CalPERS members will face insurance premium rate increases of 6% to 24% next year and will have to pay higher co-payments for prescription drugs and doctor visits. This year, the large number of shifts will force CalPERS to divide the system's enrollment into two periods. Retirees and employees of non-state public agencies have until Sept. 28 to select a health plan, while active state employees and participating university employees have until Oct. 15 (Ornstein, Los Angeles Times, 9/6).