The Sacramento Bee
February 21, 2002
By Lisa Rapaport
The California Public Employees’ Retirement System is exploring a radical overhaul of its health benefits program, admitting it can no longer use the market power of its 1.2 million members to hold down skyrocketing health care costs.
As HMO pullouts have forced members to enroll in CalPERS’ two self-insured PPO plans, PERS Care and PERS Choice, those plans have seen their reserves dip to dangerously low levels. Members in those plans, meanwhile, have seen their rates increase much faster than their counterparts in the HMO plans.
Allen Feezor, CalPERS health benefits administrator:
“HMOs are aggressively managing their risk at the expense of PERS enrollees. If the situation is not addressed, it will jeopardize our statutory requirement to provide affordable health care coverage to all, regardless of age or location,”
Barbara Adachi, a regional managing director for Deloitte & Touche:
“CalPERS needs to act now to avoid further deterioration in its plans. There’s an understanding that it will take time, but we already know that the market will not be able to solve the problems CalPERS faces.”
Comment: CalPERS is the nation’s second largest provider of health benefit plans, surpassed only by the Federal Employees Health Benefits Program. And now there is general agreement that the market will not be able to solve the problems CalPERS faces. Why? The reasons are complex, but one important fact is that private health plans in the marketplace are mandated, based on “good” business practices, to avoid risk, shifting it elsewhere. Concentrating high-cost beneficiaries into CalPERS’ self-insured plans demonstrates that size alone will not contain costs when the market is able to siphon off low-cost beneficiaries.
Haven’t we had enough of these attempts to use the magic of the marketplace to control costs and provide comprehensive coverage for everyone. It is not as if we need to continue more real-life studies on the dynamics of the health care marketplace. The experiment has been completed with seemingly endless extensions that serve no other purpose than to prolong the life and profits of these failed marketplace health plans. It is time to end policies that prolong the viability of these parasitic middleman plans, and to enact policies that prolong the viability of patients!
A single, publicly administered, universal program of health insurance is precisely what we need. Let’s go for it!