Magazine Article

Understanding your CalPERS health plan can make a difference to you and your family
2017 open enrollment is Sept 11 to Oct 6 • Go to www.calpers.ca.gov to log in

By George Diehr
Chair, CFA Retired Faculty Committee
Business, San Marcos

The “open enrollment” period for possible change in our CalPERS health plans is September 11 through October 6. This is when we have the opportunity to change from the plan we now use to cover ourselves and our families.

But, even if you don’t plan to change plans, you may still benefit by understanding more about how these plans “work.”

Overview of CalPERS Health Benefits

Managing healthcare benefits for employees and retirees of the state of California is the responsibility of the California Public Employees’
Retirement System. School districts and public agencies also may contract with CalPERS for health benefits. In total over 1.4 million people are covered at an annual cost of about $9 billion.

While CalPERS has high-level managerial responsibilities, the day-to-day administration of each health benefit plan is done by healthcare insurance companies such as Anthem Blue Cross, Blue Shield, United HealthCare, and Health Net or by combined insurer/provider companies such as
Kaiser Permanente and Sharp. We will use the term “Plan Manager” (PM) for all these organizations.

With a few exceptions—e.g., Anthem Blue Cross “PERSCare,”—the benefits provided by the health plans are essentially identical across HMO plans and across PPO plans.

Thus, employees of the DMV, the CSU, and the city of Long Beach all have access to the same plans.

CalPERS offers nine Health Maintenance Organization (HMO) and three Preferred Provider Organization (PPO) styles of health plans; employees in rural counties generally have fewer choices.

HMO
◆ Anthem Blue Cross (2 plans): Select and Traditional
◆ Blue Shield of California: Access+
◆ Health Net (2 plans): Salud y Mas and SmartCare
◆ Kaiser Permanente
◆ Sharp
◆ UnitedHealthcare
◆ Western Health Advantage

PPO
◆ Anthem Blue Cross (3 plans): PERS Select, PERS Choice, PERSCare

Every year, the CalPERS Board determines health plan availability, covered benefits, health premiums, co-payments, and, for PPO plans, co-insurance and deductibles. Plan features are not determined in bargaining or by the employer.

While CalPERS decides what plans and features to offer, these decisions must comply with state and federal laws and regulations.

The State Department of Managed Health Care enforces laws regarding HMOs. For example, CalPERS cannot provide the Kaiser HMO plan in Butte or Humboldt counties because Kaiser’s nearest qualifying facilities are outside the maximum allowed distance or travel time.

Determining Benefits

While CALPERS seldom adds or drops plans, it is common to see changes in plan design such as expansion of mental health services or changes in co-pays. CalPERS is always looking for ways to improve the quality of services and outcomes; limit cost increases; and enhance members’ access to plans.

Note that there is little empirical evidence that the quality of a treatment or drug is correlated to its cost.

Beginning in 2012, CalPERS began to implement “value based purchasing” (VBP) for its PPO plans. Broadly speaking, the idea is to provide incentives to providers and patients to improve outcomes and reduce costs.

One example is a cost limit of $30,000 for a hip or knee replacement in a PPO plan. CalPERS and the PMs ensure that these restrictions do not adversely impact the quality of or access to medical care. In 2018, 12 more procedures will be added.

Setting Premiums

Every year CalPERS’ negotiates plan premiums with PMs. The process is quite complex. The premium-setting process involves many experts and reams of data.

Premiums are determined by two major and one relatively minor factors.

Major health care factors:

1. The estimated (average) utilization per person of each of the tens of thousands of possible healthcare services such as office visit, ER visit, coronary artery bi-pass graft, … and prescription drugs.

2. The cost to the plan/insurer for each specific service and drug. For example, Faculty$90 for an office visit with a primary care physician.

Comparatively minor factor:

3. A negotiated allowance for the plan manager to administer the plan and for the insurance company to earn profit (a.k.a. retained earnings for non-profits).

Each Plan Manager contracts with providers, pays claims, and provides a host of other services. Generally, these non-healthcare costs are about 15% of total cost. But for CalPERS health plans, this allowance is only 5-6% of the total cost.

Determining the Employer’s Share of Premiums

Employees of the CSU enjoy the best employer premium support of all state employees: 100% of the “big-4” average premium for the member and 90% of this average for dependents.

The “big-4” average is the average premium of the four plans with largest enrollments. These four plans are Kaiser Permanente, Blue Shield Access+, PERS Choice, and UnitedHealthcare; the premium average is $725 for 2018.

For example, the two-person Kaiser plan has a premium of $1,434.76. The state subsidy is $725 for the member plus 90% of $725 for the member’s partner. That is a total subsidy of $1,377.50, for a net cost to the member of $57.26 per month for both people.

Most other state employees receive only 80% of the average for both the employee and dependents.

Member and Dependent Eligibility

Full-time employees are eligible for health benefits when they receive their first paycheck. Part-time employees on both semester and quarter campuses are eligible when they are at a time base of 40% for one semester or two quarters. Under the Affordable Care Act, children up to age 26 are eligible for benefits under the member’s plan.

Vesting Requirements

Vesting refers to the minimum age and the number of years of CalPERS service credit you need to receive CalPERS defined-benefit pension payments when you retire, and to get employer contributions to your health benefits in retirement.

In the case of CSU faculty, all of us need at least five full years of service credit (SC) to be vested to get pension payments. Those of us hired before Fiscal Year 2017 are vested to get health benefits as well with five years of SC. However, those hired in Fiscal Year 2017 or later will need 10 years of SC to vest in health benefits.

As for age, those faculty who were members of CalPERS before January 1, 2013 must reach age 50 to be vested in either pension or health benefits, while those who became members on January 1, 2013 or later need to be age 52 to vest.

We hope this discussion has helped you better understand some of the underlying features, responsibilities, and processes involved with your CalPERS healthcare benefit.

There are many special cases and special situations that we have not explored. Therefore, it is essential that when you face a major decision regarding healthcare benefits—such as retiring, going on leave, moving out of California, making a change in marital/partner status—that you seek information and advice from experts.

Future Outlook and Challenges

A critical challenge facing CalPERS—indeed, the nation—is the escalating cost of healthcare. Even though the CSU covers the lion’s share of premium increases, you are not immune from escalating health care costs. Even if CFA can protect our 100/90 formula, co-pays can increase, the dollar amount of coinsurance will increase with increasing cost of services, and deductibles could increase.

There is also potential indirect impact of increasing costs of any benefits paid by the state—stagnant salaries, increased teaching loads, denial of SSIs, etc.

To help assure sustainability of these benefits in retirement, we should support pre-funding of retiree health care benefits just as we make contributions during our work years to prefund pension benefits.

As patients, we can help by improving our own health, reducing the incidence of chronic conditions and controlling them when unavoidable, making wiser decisions for treatments, and supporting efforts for healthcare reform at the national level that will improve quality, constrain costs and enhance accessibility. CalPERS can and is helping in these efforts.

____________________________

Key Characteristics of HMO and PPO plans

A Health Maintenance Organization (HMO) provides health care from specific doctors and hospitals under contract with the plan. You pay co-payments for some services, but you have no deductible, no claim forms, and a geographically restricted service area. HMOs are not available in all California counties.

A Preferred Provider Organization (PPO) is similar to a traditional “fee-for-service” plan, but you must use providers in the PPO network or pay higher co-insurance (a percentage of total charges). Usually, you must pay an annual deductible dollar amount before some benefits apply. When you use a non-participating provider—a provider outside your PPO network—you are responsible for any charges above the amount your plan allows.

See available health plans by ZIP Code

Commands