CalPERS May Increase Premiums, Restrict Drug Benefits
Faced with an "unpredictable" health care market and "ballooning" prescription drug costs, the California Public Employees' Retirement System may raise premiums and restrict drug benefits to control costs in its two PPO health plans, the
Sacramento Bee reports. CalPERS trustees will meet today in Los Angeles to discuss cost-cutting options for PERSChoice and PERS-Care, which may include higher copayments or premiums; encouraging members to use mail-order prescriptions; or a "more ambitious option" of replacing one of the two plans with a state-funded HMO. PERSChoice and PERS-Care serve 22% of the 1.2 million individuals belonging to the state's pension plan. CalPERS attributes its financial troubles to increases in fees demanded by health care providers; rising prescription drug costs brought about by "heavier use and higher prices"; and three years of "huge spikes in enrollment" caused by HMO withdrawals in several regions of the state. However, "more than anything else, CalPERS blames an unpredictable market for its current losses," the Bee reports. "If there's anything we want it's predictability of pricing," Allen Feezor, assistant executive officer for the CalPERS health benefits branch, said. CalPERS' situation "illustrates how the best-laid policies can't always anticipate shifts in the health care market," the Bee reports. CalPERS anticipates a
loss of $96 million in the two plans this year.
To combat the growing expenses, CalPERS is planning to raise premiums in the two plans by 19%, but further restructuring of the plans may be met with "stiff opposition" by employee unions, which in June rejected attempts to increase copays or add restrictions to prescription drug benefits. "When CalPERS last tried to change the copayment they got bludgeoned by the unions and others who didn't want to see the increase," Allan Baumgarten, an independent health care policy researcher, said. Some employee groups believe CalPERS should make more of an effort to inform its members about various options. "We haven't seen much education in terms of using the mail-order drug option, and education is germane to keeping costs down across the boards," California State Employees Association President Perry Kenny said. In a memo prepared for today's meeting, CalPERS staff recommended against any switch in the plan's administration, which is currently performed by Blue Cross, because of "the expense and delay" that would entail. Given the "complexity" of the situation, CalPERS anticipates analyzing its options for several months before reaching a decision (Rapaport, Sacramento Bee, 11/14).
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