BILL ANALYSIS �
SENATE PUBLIC EMPLOYMENT & RETIREMENT BILL NO: AB 2142
Gloria Negrete McLeod, Chair Hearing date: June 11, 2012
AB 2142 (Furutani) as amended 5/31/12 FISCAL: YES
PUBLIC EMPLOYEES MEDICAL AND HOSPITAL CARE ACT: RISK
ADJUSTMENT PROCEDURES
HISTORY :
Sponsor: California Public Employees' Retirement System
Other legislation: None
ASSEMBLY VOTES :
PER & SS 6-0 4/26/12
Appropriations 17-0 5/09/12
Assembly Floor 75-0 5/17/12
SUMMARY :
Authorizes the California Public Employees' Retirement System
(CalPERS) to implement risk adjustment procedures that adjust
and redistribute premium payments across its health plans
based on rules and regulations established by the CalPERS
Board of Administration (Board).
BACKGROUND AND ANALYSIS :
1)Existing law :
a) 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.
b) authorizes the Board to contract with health plan
providers based on performance and to credit premiums to
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an employer for expenditures that are likely to improve
the health status of employees and annuitants.
c) 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.
d) specifies that the premiums charged for health plan
participants must also reasonably reflect the cost of
the benefits provided.
1)This bill :
a) clarifies that the CalPERS Board may implement and
administer risk adjustment procedures that require
health benefit plans to adjust and redistribute premiums
based on rules and regulations established by the Board.
b) permits the Board to adjust premiums as part of
programs for health promotion and disease prevention.
c) authorizes the Board to allocate premium dollars
across contracting health plans using a risk adjustment
procedure to be developed. Any risk adjustment program
or procedure would be at the sole discretion of the
Board.
d) includes within the Public Employees' Health Care
Fund any moneys from a health benefit plan for risk
adjustment pursuant to this bill. Permits the Board to
use reserves generated by one or more self-funded plans
for risk adjustment programs and procedures as
authorized by this bill.
FISCAL :
According to the Assembly Committee on Appropriations, this
bill would result in minor and absorbable administrative
costs for CalPERS. To the extent the actions undertaken by
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CalPERS reduce the growth in health care costs, there would
savings to the state and local employers.
COMMENTS :
1)Argument in Support
According to CalPERS, this bill will "?reduce incentives for
CalPERS health plans to load premiums to account for risk,
and foster competition based on efficiency and quality of
care."
"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. It equitably compensates providers for the 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. Incentives improve health
outcomes by increasing participation in wellness and disease
management programs designed to prevent disease, and to slow
or halt disease progression."
2)SUPPORT :
California Public Employees' Retirement System (CalPERS),
Sponsor
3)OPPOSITION :
None to date
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