CalPERS Receives 2003 Bids Seeking Premium Increases Up to 41%

CalPERS announced last week that it has received bids from health plans for 2003 that contain premium price increases as high as 41.1%, the San Francisco Chronicle reports. The pension fund did not reveal specifics about the bids, but its board is scheduled to meet tomorrow to vote on the proposals and discuss possible structural changes to the program. Last year, the board rejected the first round of managed care bids -- which ranged from 5% to 41% -- and told its 10 member plans to come back with lower bids (Colliver, San Francisco Chronicle, 4/13). CalPERS eliminated three of the health plans and managed to hold premium increases to 6%. When increases in copayments were included, members saw a 13% rise in their actual health costs last year (Pae, Los Angeles Times, 4/15). But program officials, acknowledging that health care inflation has outpaced CalPERS' ability to use its size to gain favorable contracts from health plans, are not optimistic that they can exert the same influence this year. "Some of the [managed care plans] have lost money on CalPERS in recent years," program spokesperson Clark McKinley said, adding, "The leverage we had last year is not here this year" (San Francisco Chronicle, 4/13).

CalPERS has recommended that the program limit some members' choices to two or three HMOs next year (Rapaport, Sacramento Bee, 4/12). Another possibility is that CalPERS could eliminate two of its three remaining major health plans -- Health Net, PacifiCare and Blue Shield -- retaining only five plans, instead of the seven it currently offers. McKinley said, "The rationale behind this is that (CalPERS) can save $70 million by consolidating. The other reason is ... by having a larger pool and working with fewer plans we can develop some real" preventive care and disease management programs (San Francisco Chronicle, 4/13). But eliminating two health plans would mean that 150,000 members would need to switch insurers, with 10% of them losing access to their primary care physician (Sacramento Bee, 4/12). Kaiser Family Foundation vice president Larry Levitt added, "At some point as you keep dropping plans, your leverage is going to get worse and worse" (San Francisco Chronicle, 4/13). CalPERS' health committee will take up the proposals tomorrow, and the full board will consider them on Wednesday. Spokesperson Pat Match said the board could elect not to implement any changes immediately and instead continue to negotiate for better rates. Any decision to increase premiums or copays is likely to face "strong opposition" from the program's members, the Times reports.

Because CalPERS, with 1.2 million members, is the second-largest purchaser of health care behind the federal government, its rate increases are considered a bellwether for other purchasers across the country (Los Angeles Times, 4/15). The large rate increases are "certainly a dangerous omen for all employers and all consumers," California Association of Health Plans President Walter Zelman, said (San Francisco Chronicle, 4/13). California HealthCare Foundation President Mark Smith added, "If you are a health plan looking to raise your rates, it's difficult to publicly give lower rates to CalPERS than you want to offer other purchasers" (Sacramento Bee, 4/12).