CalPERS: No increase in health premiums

Gas costs more. So does food. Health insurance? Same thing – unless you get it through one of the California Public Employees' Retirement System's preferred provider organizations.

A key CalPERS committee on Wednesday recommended that the massive pension and health fund not raise the cost of PPO premiums for state workers in 2009. In one case, they even proposed decreasing them by 3 percent.

The CalPERS' Board of Administration is expected to approve the recommendations today.

CalPERS spends about $5 billion annually to cover 1.2 million active and retired public workers and their family members. About 25 percent belong to one of its PPO plans.

Health maintenance organization premiums are not on this month's CalPERS agenda. The board will issue those rates at its June meeting. The vast majority of CalPERS members belong to HMOs.

CalPERS says it was able to keep PPO premiums essentially flat in 2009 because it has persuaded members to make lifestyle changes through healthier eating and exercise. And it says it has encouraged them to help control CalPERS' costs by requesting less costly options such as generic drugs.

But Brad Barber, a finance professor at the University of California, Davis, who follows CalPERS, said it's likely that a renewed commitment to tough bargaining and new data on member lifestyle changes have given CalPERS more negotiating leverage.

"My sense is that the folks at CalPERS didn't feel like they used their size to influence negotiations in the past," Barber said. "And it may be that members' behaviors have changed, but it might be that CalPERS is just doing a better job of documenting it than before."

For years CalPERS has toiled to hold down health benefits costs. In 2005, it stopped doing business with 38 hospitals around the state, including four Sutter facilities in the Sacramento area.

To cut premium costs, last year it allowed Blue Shield of California to withdraw from some rural parts of the state that are more expensive to service.

Experts on Wednesday said that other health care benefit providers will notice CalPERS' move, since it is the nation's third-largest health care buyer.

"This shows that CalPERS' range of efforts is bearing fruit," said Peter V. Lee of the nonprofit Pacific Business Group on Health, a San Francisco-based nonprofit that focuses on health care issues. "When one of the largest health care purchasers in the country doesn't just pound the table but seeks to make sure enrollees get the right care at the right time, it sends a signal."

With its recent success, CalPERS has amassed a $333 million health benefits surplus. It must keep some of that money in reserve, but about $60 million will be used to offset premium hikes next year.

CalPERS offers public workers three so-called preferred provider organization plans that contract with doctors and hospitals to offer care at a discount. Employers and employees split the costs of the premiums for each plan, which vary depending on things like the bargaining unit a worker belongs to, out-of-pocket expenses or the number of doctors under contract.

The recommendations proposed Wednesday include:

• Under PERS Choice the monthly premium in 2009 for a family will remain at $1,242.02.

• Monthly PERS Care family premiums will remain at $1,930.27.

• PERS Select premiums will drop 3 percent to $1,166.54 for a family. The year-old plan is the least expensive and a favorite among the youngest, healthiest employees who use medical services the least.

Fund officials said they underestimated how many would enroll in the plan and the premium decrease reflects the new numbers.

• Premiums will remain flat for retirees who use one of the three plans as a supplement to Medicare supplement.

Last year CalPERS PPO premiums rose 4.2 percent. Medicare supplements went up 6.7 percent. Neal Johnson, who works at the California Environmental Protection Agency, thought that this year he would see more of the same.

"I'm pleasantly surprised that there aren't any rate increases," he said after the CalPERS committee's vote.

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