CalPERS Approves Blue Shield HMO Withdrawal from Lake County.

Members Will Still Continue to Receive Quality Health Care

SACRAMENTO, Calif. -- The CalPERS Board of Administration today approved Blue Shield of California's proposal to withdraw its health maintenance organization product from Lake County, where the cost of health care is 89 percent higher than CalPERS statewide average.

Members in Lake County will continue to receive quality health care either through one of the System's other HMO or PPO offerings. They can also enroll in an additional PPO plan - PERS Select - approved by the Board today. PERS Select is provided at a lower cost than the standard PPO, and utilizes a smaller panel of doctors and specialists identified by Blue Cross of California as meeting certain efficiencies and patient satisfaction standards. (State members in Lake County can also take advantage of the Rural Health Care Equity Program, which would provide a subsidy of up to $1,500 per year.)

"Unfortunately, the costs to deliver care through the existing model have become unsustainable," said Rob Feckner, CalPERS Board President. "However, our members will continue to receive quality care through our other existing plan options."

In Lake County, hospitals are a key driver of health care costs. Annual hospital costs are estimated by Blue Shield to be 175 percent higher in that county - $3,923 per day, compared with $1,429 per day. Average hospital inpatient costs are 61 percent higher in that county - $8,325 per day, compared with the statewide average of $5,166 per day.

From September 2006 through February 2007, Blue Shield conducted Regional Council meetings in Lake County to identify health care cost drivers and discuss ways to improve affordability in the county. During that time, Blue Shield sought assistance from physicians and hospitals to organize them into health care delivery networks that would reduce costs and enhance delivery of care. Unfortunately, Blue Shield reported their efforts met with limited success.

"For years, other members have, in effect, subsidized these costs, but costs have become so high we are not able to continue this," said George Diehr, Chair of the CalPERS Health Benefits Committee. "We are disappointed that providers in this area were not able to be responsive to the need for more affordable care."

Lake County is one of four service areas affected. The others are Napa, Plumas, and certain portions of El Dorado County. In these four counties, the total cost of health care is 78 percent higher than Blue Shield's statewide HMO costs for CalPERS members. The Blue Shield exit from this four-county service area would begin in January 2008, and impact about 9,100 members. It is expected to save $30 million in premiums.

CalPERS is the nation's third largest purchaser of health benefits after the federal government and General Motors, providing health benefits to more than 1.2 million State and public agency employees, retirees, and their dependents. For more information, please visit www.calpers.ca.gov.