CalPERS May Reject All HMO Bids, Citing High Rates
CalPERS today will likely turn away all bids submitted by HMOs that seek to cover the program's 1.1 million members in 2002, citing "[un]justifiable services and rates," the Sacramento Bee reports. CalPERS also plans to reduce the number of plans it will eventually select to "increase competition among insurers." The program has never before capped the number of accepted offers or rejected all HMO bids submitted in the first round. CalPERS State Treasurer and Chair Phil Angelides said, "We need to throw out these bids and ask the HMOs to come back with more justifiable services and rates." He added, "It's time we exercise our market power and take control of our own destiny by sending a message to the HMOs." HMO proposals that CalPERS received for 2002 included premium hikes between 5.5% and 41% more than 2001 rates, and up to twice that amount for Medicare plans. If the CalPERS board approves the move today, HMOs would be required to submit new offers by early March. CalPERS plans to select seven among the next round of offers -- down from this year's 10 -- "based on price, services and availability."
CalPERS Health Benefits Administrator Allen Feezor said that CalPERS' HMO bids forecast a nationwide trend. "Even if we deserve lower rates, the health plans have to benchmark what they give us with an eye toward what they will then have to give to everybody else," he said. However, Paul Fronstin, senior researcher for the Employee Benefits Research Institute in Washington, D.C., doubts that CalPERS' negotiations will affect other purchasers around the nation. "I think all CalPERS is going to be able to do is hold the line on rates to some degree more than other insurers, but given the health care costs all over the country, it's hard to imagine they'll have a huge impact on rates for other purchasers," Fronstin said. But Peter Lee, president and CEO of the Pacific Business Group on Health, predicted that CalPERS' hard line would benefit other local purchasers. "It's a healthy message. Large purchasers want to make sure the overall system is solvent and their employees get good care, but they aren't ready to shovel money into plans that can't demonstrate where the money goes" (Rapaport, Sacramento Bee, 2/22).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.