CALPERS Rejects All HMO Bids as Too Expensive
The California Public Employees' Retirement System, the largest public purchaser of health insurance after the federal government, yesterday rejected all 11 bids from HMOs offering to provide coverage next year for CalPERS members, saying that the premium increases they sought were too high, the Wall Street Journal reports. According to CalPERS spokesperson Pat Macht, the proposed premium increases ranged from 5.5% to 41% and were "so out of sight" that the system asked the HMOs to submit new bids (Rundle, Wall Street Journal, 2/23). In comparison, CalPERS premiums increased by 9.2% this year, and by 9.7% in 2000. Macht added that, citing financial concerns, many of the insurers' proposals did not offer coverage in rural areas. To encourage more competition and lower premium proposals in the next round of bidding on March 20, the CalPERS board said that only the seven lowest bids will be accepted (Colliver, San Francisco Chronicle, 2/23). The criteria for acceptance will be cost, services and geographic availability (Rapaport, Sacramento Bee, 2/23). Macht said, "There are different rules of the game and only seven will survive. There is also an opportunity for some plans to gain a significant number of members, thereby spreading out their costs and creating a more favorable price for us." Bobby Pena, a spokesperson for the California Association of Health Plans, criticized CalPERS' decision, saying that recent managed care reform laws in California have created additional costs for HMOs (San Francisco Chronicle, 2/23). The Journal reports that the "steep increases" sought by the HMOs are an "ominous sign" for employers nationwide, as the CalPERS annual negotiations often serve as a bellwether for "health insurance trends" (Wall Street Journal, 2/23).