CalPERS Committee Approves Settlement With Kaiser.

SACRAMENTO, Calif.--(BW HealthWire)--June 16, 1998--Ending a previous stalemate, the Health Benefits Committee of the California Public Employees' Retirement System (CalPERS) today recommended acceptance of a new contract proposal from Kaiser Permanente HMO and withdrawal of the CalPERS threat to freeze all new CalPERS enrollments in Kaiser.

The disagreement was triggered in April when Kaiser at first refused to budge from its original demand for a 12 percent increase in 1999 premiums, which CalPERS believed was unjustified. Today the CalPERS Health Benefits Committee announced that Kaiser has agreed to a smaller increase of 10.75 percent for its Basic Plan for active employees.

"This reduction in their demand means that Kaiser members will pay $5 million less per year in premiums than they would have paid under the original 12 percent increase," said Kurato Shimada, chair of the Health Benefits Committee. "We are delighted that Kaiser finally recognized the necessity of modifying its demand. We are now satisfied we have the information we need from Kaiser to justify an increase of this size."

However, CalPERS said other health plans should not use the Kaiser increase as cover for double-digit increases of their own next year.

"By threatening to freeze Kaiser enrollments until they agreed to a reduction and by delaying approval of the Kaiser contract for an extra two months, I think we have effectively put the other plans on notice that any attempt to copy the Kaiser increase will be met with strong resistance," said Margaret Stanley, CalPERS Health Benefits Administrator.

"If the Kaiser increase becomes the excuse for a general return to the sort of runaway health care inflation that threatened to damage the national economy in the early 1990s, then the standard of living of every American could be damaged."

One key to the committee approval was Kaiser's agreement for the first time ever to give CalPERS expanded auditing authority to investigate Kaiser's justification for future rate increases.

Kaiser also agreed to give CalPERS an opportunity to voice its point of view in the HMO's decision-making process in order to avoid similar "sticker shock" surprises in future years. Under the settlement, Kaiser and CalPERS will jointly hold quarterly business meetings to closely monitor Kaiser's progress in solving its current financial problems that led to the substantial rate hike.

"With this new spirit of cooperation, we believe CalPERS will be better positioned to forecast and potentially mitigate future unforeseen rate increases of this type," said Stanley.

Today's committee action must be ratified by the full CalPERS Board of Administration tomorrow. CalPERS is the nation's second-largest public purchaser of employee health benefits behind the federal government and the largest in California. It purchases health benefits for more than 1 million public employees, retirees and their dependents at 1,176 state and local public agencies throughout California, handling $1.6 billion in annual premiums.

For further information on CalPERS, visit the system's Web site at www.calpers.ca.gov.

    CONTACT: CalPERS Office of Public Affairs
              Bill Branch/Pat Macht, 916/326-3991
              www.calpers.ca.gov