BILL ANALYSIS �
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THIRD READING
Bill No: AB 2142
Author: Furutani (D)
Amended: 7/2/12 in Senate
Vote: 21
SENATE PUBLIC EMPLOY. & RETIREMENT COMM. : 5-0, 6/11/12
AYES: Negrete McLeod, Walters, Gaines, Padilla, Vargas
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/16/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
ASSEMBLY FLOOR : 75-0, 5/17/12 (Consent) - See last page
for vote
SUBJECT : Public employees health benefits: premiums
SOURCE : California Public Employees Retirement System
DIGEST : This bill 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).
ANALYSIS :
Existing law :
CONTINUED
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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 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 that the premiums charged for health plan
participants must also reasonably reflect the cost of
the benefits provided.
This bill:
1. 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.
2. Permits the Board to adjust premiums as part of programs
for health promotion and disease prevention.
3. 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.
4. Includes within the Public Employees' Health Care Fund
any moneys from a health benefit plan for risk
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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.
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."
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
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 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.
SUPPORT : (Verified 8/17/12)
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California Public Employees' Retirement System (source)
ASSEMBLY FLOOR : 75-0, 5/17/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fong, Fuentes, Furutani, Beth
Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hern�ndez, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Ma, Mansoor, Mendoza, Miller,
Mitchell, Monning, Morrell, Nestande, Nielsen, Norby,
Olsen, Pan, V. Manuel P�rez, Portantino, Silva, Smyth,
Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski,
Williams, John A. P�rez
NO VOTE RECORDED: Fletcher, Bonnie Lowenthal, Perea,
Skinner, Yamada
DLW:dn 8/20/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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