CALPERS: TO RAISE HMO PREMIUMS; SIGNS PACIFICARE DEAL
The California Public Employees Retirement System (CalPERS)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.
"will pay average rate increases of 2.7% to 11 health maintenance
organizations starting in 1998," WALL STREET JOURNAL reports. It
is the "the first increase in five years by the powerful state
agency known for driving down medical costs," and "further
evidence that health care prices are on an upswing after several
years of decline." According to Margaret Stanley, CalPERS
assistant executive officer for health benefit services, the
increases are due in part to "soaring drug costs," which reached
as high as 20% for one plan last year (Rundle, 4/16). However,
Stanley said that even with the increase, "average monthly
premiums will still be below where they were five years ago for
most plans." The increases are "expected to receive final
approval tomorrow by the full CalPERS Board of Administration"
(CalPERS release, 4/15).
BELOW THE NORM: The JOURNAL reports that the "decision to grant
premium increases for the first time since 1993 was an
acknowledgment that HMOs couldn't continue to hold down prices
and provide quality care." JOURNAL notes that CalPERS' HMO
premium rate hikes "are a benchmark for other employers
throughout the country" (4/16). Kurato Shimada, chair of the
CalPERS Health Benefits Committee, said, "The rates are still far
below industry predictions of up to a 10% increase in nationwide
health care premiums next year. They are also below the latest
Consumer Price Index of 2.9% for medical cost inflation during
the past year" (CalPERS release, 4/15).
PACIFICARE PLAN: In related news, CalPERS announced a
three-year agreement with a subsidiary of PacifiCare Health
Systems Inc., "the only HMO that agreed to a multi-year contract"
(JOURNAL, 4/16). The other 10 participating HMOs signed one-year
contracts (CalPERS release, 4/15). Under the contract terms,
PacifiCare "will receive a 2.5% increase for 1998; rates for the
next two years will be based on a formula linked to the general
consumer price index." In addition, a portion of the premium
each year will be placed "at risk for performance as measured by
member satisfaction and the completion of certain quality
initiatives which have yet to be finalized." JOURNAL reports
that PacifiCare's goal is reach an 80% member satisfaction rate
and to provide CalPERS with physician "encounter data" for 85% of
its members. The "incentive compensation" of some PacifiCare
executives will also be linked to the performance of the health
plan (4/16). Stanley said that PacifiCare hopes to implement
similar programs with other employers (CalPERS/PacifiCare
release, 4/15).