New Regional CalPERS Pricing Plan Could Lower Costs in San Diego County

A new CalPERS regional pricing plan will allow San Diego County agencies that contract with the program to pay "slightly less" for health insurance in 2005 than agencies in Northern California, the San Diego Union-Tribune reports (Berestein, San Diego Union-Tribune, 5/22). The CalPERS board last week voted to adopt the plan that would divide its membership into five regions and charge different rates for health coverage based on where members live. The move is part of an effort to retain members after public agencies representing 37,000 members withdrew from CalPERS at the beginning of the year, in part because they had negotiated lower health insurance premium rates with other health plans. Competition among hospitals and lower labor costs have kept health care costs in Southern California as much as 40% lower than those in Northern California (California Healthline, 5/20). In a written statement released last week, CalPERS board President Sean Harrigan said that the pricing plan "is a response to an inequity created within our pool, in which employers in Southern California are paying more than they should, while others are paying less than the cost of health care of their regions." CalPERS spokesperson Clark McKinley said, "The idea is to keep ... Southern California agencies in the program."

Out-of-state CalPERS members will receive the highest premium rate increases, including a 20% increase for Blue Shield of California health plans and a 40% increase for Kaiser Permanente health plans. Under the new rates, the average 2004 premium of $315.22 for an individual on CalPERS' Blue Shield HMO plan would decrease by about 9% in San Diego County in 2005, while the average Kaiser premium of $305.42 would decrease by about 8% in 2005. Entities in the Los Angeles region that purchase their health insurance benefits through CalPERS will receive the most savings from the plan, including nearly a 20% reduction in Blue Shield HMO premium rates. However, public agencies and employees may not see an actual reduction in payments because the savings could be "eaten up by new premium hikes" from insurers, the Union-Tribune reports (San Diego Union-Tribune, 5/22).