CalPERS feeling premium pinch

Even big enrollment numbers can't create big savings for the California state retirement plan.

By Myrle Croasdale, AMNews staff. March 18, 2002.

Health care premiums are rising so fast, even the California Public Employees' Retirement System, with its 1.2 million members, can't swing fat discounts from insurers anymore.

As a result, doctors who treat CalPERS patients may well see them coming from fewer HMOs.

CalPERS announced Feb. 22 it will perform a dramatic overhaul of its health benefits during the next six months.

Instead of its current menu of seven HMOs, two self-funded PPOs and a handful of other PPO options, CalPERS may set up a statewide self-funded model that could include an HMO and PPO. Another strategy would reduce its plans to two or three options, including at least one HMO.

CalPERS is usually ahead of the curve when it comes to market trends, according to J.D. Kleinke, a medical economist and author based in Denver. But this time it's not.

"Everybody I know is mystified by this," he said. "This is a big step backward. It's a move in the direction of the paternalism and imposed choices of the mid-'90s that the world has soundly rejected."

CalPERS estimates its health care costs will surge 60% by 2006 or $4.2 billion, four times faster than the cost of living. [...]