Los Angeles Times
June 18, 2003
CalPERS Members Object to Rate Hike
By Debora Vrana and Ronald D. White
The California Public Employees’ Retirement System is facing a growing member revolt as the giant pension fund Tuesday approved a nearly 17% rate increase in health insurance payments for next year.
Although rising health-care costs are straining many employees and employers nationwide, the situation at CalPERS is especially dire. As one of the nation’s largest buyers of health care, CalPERS for many years used its clout to obtain favorable rates from insurance carriers.
But now its members are balking at escalating costs, and some of the public agencies they work for – already under stress because of the state’s budget problems – are privately threatening to pull out of CalPERS health plans and find cheaper medical coverage on the open market. Those agencies, most of which are clustered in Southern California, tend to have relatively younger and healthier workforces than others.
In turn, any exodus from CalPERS’ health plans would leave those left in the system vulnerable to ever bigger rate increases in the future – a scenario that analysts call “the death spiral.”
http://www.latimes.com/business/la-fi-calpersmo18jun18,1,3674659.story?coll=la-headlines-business-manual
The Orange County Register June 18, 2003 PacifiCare goes after CalPERS members By Nancy Luna
PacifiCare Health Systems launched a campaign Tuesday to woo a large chunk of public agencies in the California Public Employees’ Retirement System, which could raise premiums today by 18 percent.
The Cypress-based health- care organization was dumped last year when CalPERS raised premiums by 25 percent.
http://www2.ocregister.com/ocrweb/ocr/article.do?id=44166§ion=BUSINESS&subsection=BUSINESS&year=2003&month=6&day=18
Comment: CalPERS has not only had to face the general increases in health care costs, but it also covers a population that has greater health care expenses because of increasing age and a greater incidence of chronic disease. Last year, in an attempt to reduce the scale of cost increases, CalPERS terminated more expensive contracts, including PacifiCare’s. Now PacifiCare is back with a vengeance, attempting to cherry pick the portion of CalPERS’ contracted agencies that have lower costs because of regional market and other demographic differences. Removing lower cost beneficiaries from CalPERS can only result in even greater premium increases, threatening the affordability of CalPERS’ plans.
Even one of the nation’s largest purchasers of health plans is not immune to the death spiral. Although PacifiCare has become a vulture, this is not to criticize it for seeking revenge at having been cancelled, but rather it is to recognize that this smart move in the marketplace enhances investor value at the cost of patients being dumped into the swirl of the death spiral.
Splitting patients into separate pools, even very large pools such as CalPERS, will always result in inequities. Only a single, universal pool can prevent adverse selection, cost shifting, and the other inequities of multiple plans and programs, public and private. Establishing a monopsony (single purchaser) would not only end these inequities, but it would also establish a mechanism of effective negotiation for fair payment for the providers. We can control costs while making certain that an adequately funded health care system is there when we need it.