Northern California CalPERS HMO Members Will See High Rate Hikes Because of Regional Pricing Plan
A new regional pricing plan that the CalPERS board voted to adopt last month will mean that HMO premium rate increases for employees of local governments in Northern California will be about twice as high as the average premium rate increases to be paid by state employees, the Sacramento Bee reports (Rapaport, Sacramento Bee, 6/25). The CalPERS board last month voted to adopt the plan to 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, 5/24).
CalPERS officials said that without the regional pricing plan, local entities providing coverage for an additional 100,000 Southern California residents could withdraw from CalPERS, increasing health costs by as much as $40 million. CalPERS plans an average HMO premium increase for state workers and retirees of about 11.4% for 2005, but local government workers across the state face increases that vary widely. HMO premium rates for local government workers in the Los Angeles area will decrease by as much as 8.7%, but HMO premium rates will increase by as much as 23.7% next year for some local government workers in Northern California.
The "steep rate hikes" have left local government officials "scrambling to cover the increase with public funds or with larger contributions from workers," according to the Bee. Many groups, such as the school districts in Davis, Vacaville, Fairfield and Napa, are considering banding together and withdrawing from CalPERS, the Bee reports. However, local government leaders say that CalPERS rules make it difficult to withdraw. Under CalPERS rules, governments have 60 days after the fund announced its HMO rates to notify trustees that they want to leave. Local officials say that 60 days is not enough time to compare alternative plans and obtain approvals from unions and local government bodies. In addition, local officials say that their efforts are further hampered by a rule barring CalPERS' HMOs -- Blue Shield of California and Kaiser Permanente -- from giving price estimates to local governments before they leave the fund. If local entities do leave CalPERS, they are not allowed to return for five years.
Joanne Narloch, a human resources manager for Lodi, said she is talking with local officials in Galt, Manteca and Tracy about leaving CalPERS. She said, "It may not come together in time for next year, but we still need to be thinking in that direction." CalPERS spokesperson Clark McKinley said that all of the rules about local governments leaving the pension fund are "designed to make it easier for us to have a stable membership and stable costs from one year to the next." He added, "I think a lot of these people will be frustrated and say they are looking around. A lot of them will look and find there is no better deal than what they already have" (Sacramento Bee, 6/25).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.