Higher co-payments for CalPERS Health insurance

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The giant pension plan deals for smaller jumps in HMO premiums by agreeing to higher co-payments.

Orange County Register

The California Public Employees’ Retirement System, widely viewed as a bellwether of health-insurance trends in the state, said Tuesday that it has reached deals with eight HMOs to limit premium increases in 2002 by asking employees and retirees to pay more for their prescription drugs and doctor visits.

The higher co-payments, which CalPERS rejected last year, are a sign of the growing pressure on employers as health care spending and insurance premiums rise sharply. The CalPERS plan, if approved by the 13-member board at a meeting today, would mark the first time the group has raised co-payments since 1993 — when health costs were also escalating rapidly.

Premium increases for 2002 would average 6 percent, less than half the roughly 15 percent CalPERS expected a month ago. Most of that difference is the higher copayments, which shaved an estimated $143 million off the HMO bids. CalPERS, the nation’s largest public pension fund, buys health insurance for 1.1 million state and local government employees and their families.

Health care industry observers said CalPERS’ decision to push more of the cost onto employees is a harbinger of things to come, as employers struggle with sharply rising health costs at a time when the economy is beginning to slow. Some said the move would help interject some fiscal sanity in the health care system by giving consumers more responsibility for their medical choices. Others rejected it as unfair cost shifting from HMOs to employees and retirees.

This is the kind of unseen rate increase that CalPERS should not be leading the way on,” said Jamie Court, an activist at the Foundation for Taxpayer and Consumer Rights. The fact that CalPERS has to endure this suggests that the rest of Californians, with far less bargaining clout, are in for even higher costs coming out of their pockets.”

Bobby Pena, a spokesman for the California Association of Health Plans, disagreed. We have consumer demand that has really skyrocketed,” he said. Some people are going to argue that you’re limiting people’s access because they can’t afford the copay. But what you’re looking at in reverse is employers perhaps not even being able to afford coverage at all.”

If CalPERS’ board approves the plan for 2002, state and local employees will pay $10 for an office visit, compared with $5 now. The copayment for a 30-day supply of prescription drugs will rise to $15 for brand-name drugs and $30 for drugs that are not on the HMO formulary, from $5 this year. The payment for generic drugs will remain at $5.

Nationally, spending on prescription drugs is rising about 20 percent a year as new products come to market, and pharmaceutical companies aggressively market them directly to consumers.

Wendy Platt, a consultant with the Employers Group, said that even with higher copayments for drugs and doctor visits, many smaller private employees will likely face bigger premium hikes than CalPERS, because they don’t have the same weight in the market.

CalPERS wielded its clout by rejecting all 10 original HMO bids. It later dropped three HMOs from its lineup — Aetna, Cigna Health Care of California and Lifeguard — while adding one new one.

It narrowly kept Health Net, and froze enrollment.

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