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CalPERS Board Adopts 2012 Health Benefits Rate Package

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CalPERS Press Release June 15, 2011 --

The California Public Employees’ Retirement System’s Board of Administration on June 15 adopted a 2012 health care rate package with an overall annual premium increase of 4.1 percent for more than 1.3 million CalPERS members.

The program’s rates and benefit provisions will take effect for the 2012 calendar year that begins next January 1.

“These rates represent a lot of hard work by our staff to negotiate the most cost-effective package possible in a health care market known for continuing price inflation,” said Rob Feckner, CalPERS Board President. “Yet even these relatively low premium increases still are too high for many of our members in these difficult economic times. We will keep seeking new ways to rein in costs.”

The package includes coverage increases of 5.3 percent for Basic Health Maintenance Organizations (HMOs, non-Medicare), 3.0 percent for Basic Preferred Provider Organizations (PPOs), and 0.0 percent for Medicare plans.

Benefit changes in the package will save more than $60 million while focusing on quality, patient safety and engaging members in their care. For example, members will pay the difference when using brand name drugs if approved generic equivalents are available. Prescription drug copays will go up for retail and mail order preferred and non-preferred brand name drugs, but those for generics will not.

“We’re always pushing for new initiatives that will reduce the cost of health care,” said Priya Mathur, Chair of the Board’s Health Benefits Committee. “The only way we can slow down these costs is to make substantive changes to the way the market works. So we’re continuing to develop our purchasing strategy and to engage our employees and retirees in health care decision-making.”

The overall rate increase for 2012 of 4.1 percent was less than half the premium increase of more than 9 percent for the 2011 coverage year. While drug copayments will go up next year in some cases to encourage the use of generic and mail order drugs, they still will fall below the U.S. median for generic and preferred brand drugs, and slightly above the median for non-preferred drugs.

The 2012 plan expands CalPERS PPOs’ value-based purchasing design program currently implemented for hip and knee replacements to include arthroscopies, colonoscopies and cataract surgery performed in centers that are as effective but less expensive than outpatient hospitals. Blue Shield plans to expand its NetValue plan into Contra Costa County using the John Muir Physician Network, making the lower-cost option available to 9,200 Blue Shield Access+ members currently with John Muir and another 5,000 with other providers. Blue Shield also plans to add providers to NetValue programs in Los Angeles, Riverside, Orange and San Bernardino counties.

The rate projections for 2012 include application of a portion of the PPO plans’ excess reserves to mitigate 2012 PPO plan rate increases, proposed pharmacy and benefit changes, and anticipated Early Retiree Reinsurance Program (ERRP) funds for coverage of early retirees under the federal health care reform law. The Blue Shield rate includes an offset as a result of favorable claims experience.

Rates in 2012 for HMO Basic plan members will rise by 7.0 percent for Kaiser and by 3.5 percent for Blue Shield Access+ and NetValue. For PPO Basic plans, rates will rise by 1.9 percent for PERS Choice, by 15.1 percent for PERSCare, but decline by 1.1 percent for PERS Select. Medicare HMO rates will decline by 1.6 percent for Kaiser, increase by 0.03 percent for Blue Shield Access+ and NetValue, increase by 2.0 percent for PERS Choice and Select, and decline by 0.3 percent for PERSCare.

Rates for three affiliated plans for public safety officers will remain unchanged for Basic and Medicare plans of the California Association of Highway Patrol (CAHP); increase by 3.2 percent and 11.8 percent respectively for the California Correctional Peace Officers Association (CCPOA); and increase by 5.5 percent and 0.0 percent for the Peace Officers Research Association of California (PORAC).

CalPERS is the largest purchaser of public employee health benefits in California, and the second largest public purchaser in the nation after the federal government. It spends approximately $7 billion a year to provide care to active and retired State and local government employees, retirees, and their family members.

For more information, go to www.calpers.ca.gov

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