BILL ANALYSIS �
AB 2142
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Date of Hearing: April 26, 2012
ASSEMBLY COMMITTEE ON PUBLIC EMPLOYEES, RETIREMENT AND SOCIAL
SECURITY
Warren T. Furutani, Chair
AB 2142 (Furutani) - As Amended: April 23, 2012
SUBJECT : Public employees' health benefits: premiums.
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). The Board would also
be authorized to adjust premiums as part of health promotion and
disease management programs.
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.
FISCAL EFFECT : Unknown.
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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 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
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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,
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."
REGISTERED SUPPORT / OPPOSITION :
Support
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California Public Employees' Retirement System (Sponsor)
Opposition
None on file
Analysis Prepared by : Karon Green / P.E., R. & S.S. / (916)
319-3957