BILL ANALYSIS Ó
AB 2142
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2142 (Furutani)
As Amended July 2, 2012
Majority vote
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|ASSEMBLY: |75-0 |(May 17, 2012) |SENATE: |38-0 |(August 21, |
| | | | | |2012) |
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Original Committee Reference: P.E.,R & S.S.
SUMMARY : Authorizes the California Public Employees' Retirement
System (CalPERS) to implement risk adjustment procedures that
adjust and redistribute payments across its health plans based
on rules and regulations established by the CalPERS Board of
Administration (Board). Specifically, this bill :
1)Authorizes CalPERS to implement risk adjustment procedures
that adjust and redistribute payments across its health plans
based on rules and regulations established by the Board.
2)Specifies these risk adjustment procedures be designed to
encourage health plans to offer benefits based on medical and
administrative efficiency as well as quality of care, rather
than on an employee's or annuitant's health status or on
service areas with low-risk populations.
3)Allows the Board to adjust premiums, as part of its programs
for health promotion and disease prevention.
4)Includes within the Public Employees' Health Care Fund any
moneys from a health benefit plan for risk adjustment, and
permits the board to use reserves generated by one or more
self-funded plans for risk adjustment programs and procedures.
The Senate amendments :
1)Clarify that the risk adjustment procedures should be designed
to encourage plans to offer benefits based upon medical and
administrative efficiency and quality of care rather than on
the employee's or annuitant's health status or service areas
with low-risk populations.
2)Permit the board to use reserves generated by one or more
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self-funded plans for risk adjustment programs and procedures.
3)Make other clarifying and technical changes.
EXISTING LAW :
1)Authorizes the CalPERS Board to administer the Public
Employees' Medical and Hospital Care Act (PEMHCA), which
provides health benefits for the State of California and for
more than 1,100 local and governmental agency and school
employers. The Board annually determines health plan
availability, covered benefits, health premiums, and
out-of-pocket payments for over 1.3 million participants at an
annual cost of nearly $7 billion.
2)Authorizes the Board to contract with health plan providers,
to contract with providers based on performance, and to credit
premiums to an employer for expenditures that are likely to
improve the health status of employees and annuitants.
3)Authorizes the Board to contract for, or approve, health
benefit plans that charge a contracting agency and its
employees and annuitants rates based on regional variations in
the costs of health care services, and to contract for, or
approve, health benefit plans exclusively for the employees
and annuitants of contracting agencies.
4)Specifies the premiums charged for health plan participants
must also reasonably reflect the cost of the benefits
provided.
AS PASSED BY THE ASSEMBLY, this bill was substantially similar
to the version approved by the Senate.
FISCAL EFFECT : According to the Senate Appropriations
Committee, "CalPERS will incur administrative costs associated
with promulgating regulations, implementing the risk adjustment
procedures and administering necessary adjustments, as well as
developing health promotion and disease prevention programs.
Exact costs are unknown, but committee staff believes they will
likely exceed $150,000 annually (Special).
"The proposed risk-adjustment model could potentially save money
to the extent that it encourages members to select the most
cost-efficient health plans. Any savings will depend on several
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factors including: the adjustment methodology; the speed at
which member behavior changes as a result; and the contribution
formulas for the various participating employers and their
employees/retirees."
COMMENTS : CalPERS administers three Health Maintenance
Organization (HMO) plans: Blue Shield of California Net Value;
Blue Shield Access+; and Kaiser Permanente. It also manages
three self-funded Preferred Provider Organization (PPO) plans,
which are PERS Select, PERS Choice, and PERSCare. In addition,
CalPERS administers three plans for association members, which
are the California Correctional Peace Officers Association, the
California Association of Highway Patrolmen, and the Peace
Officers Research Association of California.
The following information was provided to the Committee by
CalPERS:
The risk-adjustment process allows for the adjustment
of health plan payments, health care provider payments
and individual or group premiums, so that they reflect
the health status of members. It typically involves
two steps:
1) Risk assessment - measuring the risk (represented
by predicted overall claim dollars) of each person in
a group relative to the average risk.
2) Premium/payment adjustment - modifying of
premiums/payments to health plans to reflect
differences in risk.
Risk adjustment encourages CalPERS health plan
providers to compete on the basis of medical and
administrative efficiency and quality of care rather
than on their ability to select risk, equitably
compensates providers for the participant health
risks they assume, and maintains participant choice
from among multiple health plans based on premiums
that reflect plan design differences and relative
efficiencies, rather than participants' health
status.
The federal Affordable Care Act (ACA) authorized the
establishment of risk adjustment programs as part of
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the newly created statewide health insurance exchanges
to transfer funds from health plans enrolling the
lowest-risk individuals to health plans enrolling the
highest-risk individuals in order to reduce or
eliminate premium differences among health plans. The
federal Department of Health and Human Services (HHS)
is developing a methodology for the risk-adjustment
program and will adopt these changes through
regulations. Although CalPERS is not subject to this
requirement or participation in a statewide insurance
exchange, it is seeking the authority to adopt
methodologies through regulations similar to those
developed by HHS for risk adjustment.
Wellness and disease management incentives improve
participants' health outcomes by increasing
participation in wellness programs to prevent disease,
and in disease management programs to slow or halt
disease progression. While existing law provides
authority for the Board to implement cost containment
and cost reduction incentive programs, AB 2142 would
give the Board broad authority to develop wellness and
risk adjustment programs that include the adjustment of
premiums, including the provision of incentives for
disease management and tobacco cessation. These
changes may be incorporated into the Board's next
health benefits plan procurements for 2014.
Wellness promotion and prevention initiatives are also
included as part of the ACA as a means to constrain
the continuing growth trend of medical-treatment
spending and costs. According to the Centers for
Disease Control and Prevention, chronic diseases such
as asthma, cancer, diabetes and heart disease account
for more than 75 cents of every dollar spent on health
care in the United States. Wellness promotion and
disease management may help prevent more expensive
modes of treatment for these and other chronic
diseases, which might have been prevented or better
managed at the outset.
According to CalPERS, "Authorizing the Board to adopt these
changes will allow CalPERS to improve participant health
outcomes, encourage health plan competition, maintain plan
choices, promote efficiency and quality amongst health plans,
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and lower health care costs. Without these changes, CalPERS will
be limited in its ability to develop more effective health
benefit programs and reduce participant, State and contracting
agency benefit costs."
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957
FN: 0005199