CalPERS Allows OMNI HMO to Freeze Enrollments in Rural North Coast County.

SACRAMENTO, Calif.--(BUSINESS WIRE)--Oct. 22, 1997--The California Public Employees' Retirement System (CalPERS) agreed today to allow OMNI Healthcare to freeze all new enrollments in Del Norte County on California's rural north coast, effective November 1st, to prevent further financial losses to that health plan.

OMNI will also be allowed to freeze new enrollments of CalPERS members who live across the nearby state line in the Brookings, Oregon, area.

The enrollment freeze will not affect any current OMNI member. But any CalPERS members in that area who applied for a change to OMNI during the recent Open Enrollment period which ended October 15th will be asked to choose another plan instead. OMNI is the only health maintenance organization (HMO) available to CalPERS members in that sparsely populated area. But they can still choose from two CalPERS self-funded preferred provider organizations (PPOs) -- PERSCare and PERS Choice. Correctional officers at the Pelican Bay prison in Del Norte County are also eligible for a special PPO which CalPERS administers for members of the California Correctional Peace Officers Association.

Del Norte County is adjacent to three other rural Northern California counties along the Oregon border where another HMO, National, was given permission in August to withdraw from CalPERS, effective January 1, 1998, in order to stem similar financial losses in Lassen, Modoc and Siskiyou counties. Like OMNI, National was the only HMO available to CalPERS members in those three counties.

"One of CalPERS' top priorities for several years has been the expansion of affordable managed care into the rural parts of California where medical costs can be up to 50 percent higher than in urban areas," said Kurato Shimada, chair of the CalPERS Health Benefits Committee. "The problems encountered by both OMNI and National are indications of just how tough it is to provide affordable health care in rural areas. It is a major challenge for the health care industry and for CalPERS."

OMNI officials say medical costs are higher in Del Norte County because of the shortage of doctors and hospitals and the resulting lack of competition. Because it is difficult to get doctor appointments on short notice, OMNI members in that area tend to seek "urgent care" in expensive hospital emergency rooms. In addition, OMNI says members in Del Norte County are using medical services at a higher volume than members are in other parts of the state.

OMNI says its expenses in Del Norte County are exceeding income by approximately 20 percent. CalPERS agreed that failure to freeze enrollments there would jeopardize OMNI's financial viability. OMNI says it will continue working with physicians and hospitals to solve all these problems so the HMO can eventually reopen membership to area residents.

The freeze will not affect future OMNI enrollments of CalPERS members elsewhere in California. Nor will it affect the 3,000 CalPERS members in Del Norte County who are currently OMNI members, many of them state employees at the Pelican Bay maximum security state prison. Also unaffected will be the 500 existing OMNI members just across the Oregon line where many of the prison employees live. "CalPERS is taking the challenge of providing affordable health care to rural areas very seriously," said Margaret Stanley, CalPERS Assistant Executive Officer for Health Benefits. "That's why last month we asked the American health care industry to come forward with innovative ideas for solving a great many health care problems -- including the rural dilemma."

CONTACT: CalPERS Office of Public Affairs

Bill Branch/Pat Macht, 916/326-3991