CalPERS Health Hikes Start of National Trend?

April 15, 2002 ( - If the experiences of the giant California Public Employees Retirement System (CalPERS) prove as much of a bellwether as they have in the past, many US employers should prepare for a whopping employee health-insurance increase.

The fact that CalPERS’ insurance costs could skyrocket by as much as 41% by 2003 almost certainly foreshadows higher premiums for workers and their employer in a range of industries, Reuters quotes analysts as saying.

Health plans submitting bids to CalPERS initially planned HMO rate hikes of 15.1% to 41.1% during 2002. Health program development division chief Nancy Welsh described the bids as “an all-time high” and noted that the members were offered no added services.

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CalPERS Wants Fewer Providers

In a related issue, CalPERS officials this year are expected to consider cutting the number of managed-care plans available to their 1.2 million members as a cost-saving move. Eventually, officials said, they’d prefer to contract with a single health provider.

“There is a recognition that our years of being able to leverage prices are over and CalPERS can’t bring affordable health care to its members alone,” CalPERS spokesperson Patricia Macht told Reuters. “This is a problem that is endemic to state and nation. The back is beginning to break on the health-care delivery system in the United States.”

CalPERS will consider cutting two of its seven health-care providers including two of the three large HMO organizations. That proposal would force 150,000 members to change providers, although 90% would keep their current physicians.

“For CalPERS, as with health programs all across the country, there are no easy choices this year,” Welsh wrote.

The CalPERS health committee, which includes seven of the 13 board members, is scheduled to vote on the rates and plan-cutting proposal Tuesday.

Last year, CalPERS mitigated a 13%-rate hike by HMOs by increasing members’ out-of-pocket costs for office visits and prescription drugs in 2002, Macht said.