The U.S. health care system is in a moment of reckoning. No one pretends to have the perfect solution. But there is something consumers can agree on: More transparency is needed.
Consumers and their employers, which insure 49 percent of American health coverage, are demanding to know exactly what goes in to their health care costs. The White House is proposing requirements that pharmaceutical companies list drug prices during television commercials. Hospitals now post their costs online. In January, Gov.Gavin Newsom announced proposals to increase health care competition and accountability in California.
I want to tell you how a transparent benefits model helps CalPERS – the second largest purchaser of health care in the United States – keep costs down and health care quality high.
How low are costs? This year, the average overall premium for our health care plans increased by just 1.16 percent. The year before that: 2.33 percent.While some of our members may have seen larger increases by individual health plans, the overall costs have remained low.
That’s money the public agencies that contract with us can literally take straight to the bank.
First, some background.
CalPERS administers health benefits for the state of California. State workers and CSU employees represent 59 percent of our 1.5 million-member pool. Public agencies and schools may also choose to contract with CalPERS for health benefits. These employers range from cities to water districts to community colleges to library systems. In total, 1,167 employers contract with us to offer health care for their employees.
Employers choose the CalPERS Health Program as a trusted third-party administrator because we offer a stable and transparent partnership. With more than 50 years as California’s largest health care purchaser, we have the size, strength,and expertise to advocate and negotiate with insurers on behalf of our employers and their employees.
As a government system, we’re required to comply with the Public Employees’ Medical & Hospital Care Act (PEMHCA), which means, among other things, that we can’toperate at a profit and we’re required to disclose our administrative costs. Our current administrative fee is 0.23 percent; it has never risen above 0.5 percent. That’s one way we keep health premiums low for members and employers.
But it’s not enough to just focus on lowering costs. Delivering quality health care is paramount to improving the livelihoods of Californians and to ensuring a sustainable health care system for the long term.
We made a commitment to the employers that contract with us and to the public employees who receive health care from us. Eachof our health plansmust offer strong wellness programs and free preventive care office visits for non-Medicare members. And they must provide access to free or low-cost health events throughout the state. These are benefits employers can offer directly to their dedicated employees.
Innovation also can help contain costs and drive change for the better. In 2019, we introduced what’s called value-based insurance design for one our PPO plans. Members in the plancanreduce their annual deductible by completing healthy activities, such as a getting a flu shot or completing a non-smoking certification. Following introduction of the changes, plan membership jumped from 55,675 to 72,351.
In 2019, the monthly premium for this plan decreased by 26 percent, lowering it to the 2013 rate level. We turned back the clock for employers and employees. When people and their employers actively engage in preventive, value-based health care, everyone wins.
The same goes for retirees. CalPERS is deeply invested in ensuring healthy, secure retirements for those who have served California. We offer a wide variety of Basic and Medicare plans for retirees, and absent an employer, we offer those plans directly to retirees.
It helps to have 1.5 million members and 12 health plans to choose from. But size and sustainability of the system aren’t enough. It’s CalPERS’ mission to improve health outcomes through high-quality, affordable care. That means acting as a trusted partner to employers and members.
Good health is in everyone’s best interest.
Editor’s Note: Updates earlier version and tightens. Liana Bailey-Crimmins is the Chief Health Director of the California Public Employees Retirement System.