Resource

Guide to CSU Health Benefits open enrollment

Open Enrollment for Health Care Benefits
For CSU Employees, through October 11, 2013

Information provided by George Diehr
Professor of Management Science (retired), CSU San Marcos
Member, CalPERS Board of Administration

The open enrollment period for CalPERS healthcare benefit plans is here through October 11. CSU employees, including the faculty, should already have received information about this from CalPERS.

If you have not, full information is at the CalPERS web site.

WHAT’S NEW

First, it is likely that all of the plans offered in 2013 will be available in 2014 with virtually no changes in benefits. So if you are satisfied with your current plan you should not have to do anything. However, keep an eye on CFA Headlines and any subsequent mailings from CalPERS in the event there are last minute changes in plan availability.

The good news is that 2014 will see major changes in the number of available HMO plans while the three PPO plans—PERS Choice, PERS Select, and PERSCare—remain available with no new offerings.

The CalPERS “Open Enrollment” mailing includes a table of available plans by county.

Some counties where only a single HMO is available today will see the addition of one or two HMO plans from Anthem Blue Cross.

Many counties which currently enjoy the choice of three HMO plans—Kaiser, Blue Shield Access+, and Blue Shield Net Value—will see not only the addition of the Blue Cross HMO options but also plans from UnitedHealth and, in most Southern California counties, Health Net’s Salud y Mas and SmartCare plans.

Members in San Diego county do not get Blue Cross or UnitedHealthcare HMO plans but do have Sharp’s low-cost Performance Plus plan.

Even if you are satisfied with what you now have, you might want to take a look at the table of plan offerings, the premiums, and the premium changes for continuing plans.

The average premium change for 2014 is quite modest—only about +3%. And this increase is low despite increased costs associated with the implementation of more provisions of the Accountable Care Act, aka “ObamaCare.” (We suspect many ACA critics will be particularly disappointed that the increases failed to meet their doomsday predictions.)

See a side-by-side summary of all the plans.

BIG CHANGES IN 3 PLANS IN 2014

Three plans stand out in terms of the magnitude of premium changes: Kaiser (CA) up 8.6%; PERS Select up 28.5% (but not to worry—see below); and PERSCare down a whopping 32.1%.

Let’s deal with the easier ones first: PERSCare and PERS Select.

While Select increased 28.5%, as the table shows the premium cost to faculty for this plan is still $0—that is, the CSU premium support  exceeds the Single, 2-Party, and Family premiums. Thus, if you are in PERS Select, and happy with it, the huge increase will have no impact on your share (0%) of the premium.

PERSCare premium decreased by almost one-third and the net premium cost to members is now only $179 for 2-Party coverage versus $876 in 2013. (The premium for a Single-party plan in 2013 is $1,030.) The primary factor for the huge increase in Select premiums and even larger decrease in Care’s premiums is due to CalPERS’ use—for the first time—of “risk-adjusted” premium setting.

If you like PPO-type plans, the total (non-prescription drug) copay limit for a family provided by PERSCare is $4,000 versus $6,000 for PERS Choice. PERSCare also has lower co-insurance rates (what you pay) for many services: 10% for inpatient visits, surgery/anesthesia, X-ray/lab, durable medical equipment, and acupuncture/ chiropractic visits; co-insurance for Choice and Select is 20%.

Which brings us to Kaiser’s substantial premium increase.

Kaiser’s 8.6% premium increase will result in employee costs for a family plan of $161 in 2014, versus $69 in 2013. Several of the alternative HMO plans require substantially lower employee cost for Family coverage:

• Anthem Select $60
• Blue Shield NetValue $0
• Health Net Salud y Mas $0 (Southern California)
• SmartCare $85 (Southern California)
• Sharp (San Diego) $0

Kaiser has made it clear to CalPERS that it is committed to focusing on cost and that being one of the most expensive HMOs available to our members is unacceptable to them. Nevertheless, whatever they do to get better control over their costs will not help in 2014.

CHANGES THAT HELP CONSTRAIN PREMIUM INCREASES

Another change, like risk-adjusted premiums, is beneficial but not obvious to CalPERS members: CalPERS will now self-insure all plans in 2014 to the extent allowed by law. (CalPERS has self-insured its PPO plans for many years.) Assuming risks previously borne by insurers reduces the premiums.

In effect, CalPERS “rents” each plan manager’s provider network, pays the plan the appropriate revenue based on the health risk of its members, and negotiates a reasonable payment for the plan’s administrative costs and profit/retained earnings.

Those who think insurers are “evil,” profit mongering hyper-capitalists should be pleased—and probably surprised—to know that this allowance for non-medical costs is only about 5-6% of total premiums.

The big drivers of health care cost increases are not insurers/plan managers but providers—health care professionals,  hospitals, pharmaceutical companies, etc.—and, to a not-insignificant-degree, patients themselves. An article planned for this fall’s California Faculty magazine will address drivers of healthcare cost increases and the significant steps CalPERS has taken and plans to take that will reduce real costs of care, as opposed to simply shifting costs to members.

SELECTING A PLAN

We have provided information on plan cost in terms of the employee’s share of premium in the foregoing. But other costs such as co-pays and, depending on plan type, co-insurance and deductibles, also need to be considered. There are also some differences across plans—especially between HMO and PPO plan types—in coverage. And, you may have a preference for certain providers and need to know if they are in a plan’s network. Guides to making these decisions are included in the open enrollment mailing from CalPERS: see “Guide to Choosing a Health Plan.”

CalPERS’ “Plan Chooser” provides the following tools:
• Explore health plan features
• Review the services that each health plan covers
• Access doctor directories, drug formularies and Evidence of Coverage publications
• Estimate out-of-pocket costs
• View health care quality and patient experience ratings
• Compare and rank plans based on personal preferences

Good luck!

 

ENDNOTE

The CSU support is determined by the so-called 100/90 formula. The average premium cost of the four plans with largest memberships is determined. 100% of that average is contributed by the CSU for the member and 90% of that average for dependents. For 2014, the (weighted) average of the “big 4” is $642. The 2-Party premium is simply twice the Single party premium; thus the 2-Party CSU contribution is (about) $1,218. [I am unsure why 1.9*$642 does not result in premium support of $1,220, but who am I to question.] The Family premium is 2.6 times the single party premium; thus the support level is (about) 1 + 0.9 + 0.9*0.6 = 2.44 times the single party support.

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ADDITIONAL INFORMATON: UNDERSTANDING “RISK-ADJUSTED PREMIUM SETTING”

There is a phenomenon in healthcare insurance known as “adverse selection.” By law, CalPERS sets premiums based only on the plan and the unit size: Single-party, 2-Party, Family. For State CalPERS members, premiums do not vary with age, health status, or region. Without risk-adjusting, the premiums reflect the medical needs of the members of each plan, plus a small allowance for administering the plan and for profit.

Consider what happens if one plan attracts younger (hence, generally healthier on average) members. That plan will have lower medical costs, hence a lower premium.

This is what happened with the recently introduced PERS Select plan. Newly hired—younger, healthier—employees, many of whom had little or no prior healthcare coverage, elected this plan disproportionately to other plans. That resulted in lower medical costs and lower premiums.

While some older employees switched from (typically) PERS Choice to Select, “inertia” and the fact that the Select network of primary care physicians was more limited, discouraged most from switching. Those who switched also tended to be healthier.

With the loss of healthier individuals from Choice, the higher-than-average medical needs of those who remained increased its cost, hence its premiums.. Over time, the increasing difference in Select and Choice premiums encouraged more members to switch, further increasing the difference.

This is exactly what occurred years ago when PERS Choice was introduced as a lower-benefit option to PERSCare. Left unadjusted, the increasing difference in premiums encourages more and more people to switch to the lower-cost plan, leaving the high-cost plan with people who would find it difficult to switch due to long-term established relationships with care-givers.

This is “adverse selection.” The continued shift of healthier people to the lower-cost plan, leaving the less healthy in the higher-cost plan, thus increasing the difference in premiums. This eventually results in the total demise of the higher-cost plan— the so-called “death spiral.”

Basing premiums for a plan on an assumed average health-risk membership rather than on the health of its actual members ameliorates adverse selection.

If a plan attracts healthier-than-average members, the revenue it receives is reduced; plans with above-average health-risk members is subsidized to cover its higher costs. Thus, there is little, if any, incentive or advantage for a plan to pursue or have a lower risk membership.

Applying risk-adjustment to determine premiums resulted in a dramatic increase in the nominal premium for PERS Select because, if its membership had average health riskits costs would be much higher. If it continues to have lower-risk members, its premium revenue will be shifted to subsidize plans such as PERSCare, which has higher risk members.

Note that CalPERS did not “invent” the risk adjustment process. Medicare uses a similar method; the UC system also uses risk adjustment. Using risk-adjusted premiums should allow CalPERS to offer more plans and encourage plan managers to offer plans in areas where costs are higher or members are not as healthy.

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