CalPERS OKs 2008 Premiums; Pressure Builds to Control Costs

The CalPERS Board of Administrators on Wednesday voted to approve a 6.3% average increase in health insurance premiums, capitalizing on a series of changes intended to control rising health care costs, the Sacramento Bee reports (Chan, Sacramento Bee, 6/21).

CalPERS trustees in May approved copayment increases for physician visits and brand-name prescription drugs. Higher copays for prescription drugs were projected to save about $30 million next year.

Trustees also approved a proposal by Blue Shield of California to drop its HMO coverage for CalPERS members in El Dorado, Napa, Lake and Plumas counties. The four counties are considered among the most costly for health care services (California Healthline, 6/20).

In addition, trustees on Wednesday approved dropping plans offered by Western Health Advantage, a move that will push about 24,000 Sacramento-area members to choose other health plans. WHA is a regional plan based in Sacramento (Robertson, Sacramento Business Journal, 6/20).

In a statement, CalPERS indicated that the changes would reduce state spending on employee health benefits by about $65 million in 2007-2008 below the initial projection by budget analysts, who expected premiums to increase by 9.5% (Reuters, 6/20).

Overall, CalPERS next year will spend about $5.3 billion on health insurance coverage for about 1.2 million members. This year's tab for health benefits came to about $4.9 billion (Colliver, San Francisco Chronicle, 6/21).

CalPERS leaders said they were pleased with this year's premium increase but recognized that the pension fund will be pressed to avoid larger premium increases in the future.

George Diehr, chair of the CalPERS Health Benefits Committee, said that even with CalPERS' clout in the market, the pension fund cannot dictate the terms of agreements with insurers and health care providers. He said, "There is no silver bullet" to controlling health care costs. "We need legislation. We need to break up hospitals."

CalPERS trustees will hold a retreat next month to consider future strategies for controlling health care cost increases, likely through an increased focus on disease management (Sacramento Bee, 6/21).