California Teachers' Pension Mulls Direct Health Contracts.

The California State Teachers Retirement System might establish a statewide health-care system for its members and might bypass traditional health maintenance organizations to contract directly with providers.

Jim Mosman, executive director of the teachers retirement system, said the board was considering how to provide health care for members who must pay out of pocket for Medicare. About 25,000 retired teachers do not qualify for Medicare because they were not required to pay Social Security taxes when they worked, Mosman said. The tax law was changed in 1986, requiring teachers to pay Social Security taxes.

In light of the members who do not have health care now, Mosman said the group is looking into establishing a statewide health-care system.

One option being considered is joining the California Public Employees' Retirement System, which has a statewide health-care system. In the past, some school districts have resisted joining CalPERS because that system requires districts to pay teachers' retirement costs.

"Smaller to medium-size districts say they can't afford it," Mosman said.

A task force for the teachers retirement system also has suggested that the system establish its own plan and contract directly with providers.

Mosman cautioned that that option needs more study and could require the Legislature to rewrite laws.

A more likely short-term resolution may be establishing a statewide pharmaceutical network or some other way to help retirees pay their Medicare premiums, Mosman said.

According to the task force's report, if the retirement system contracted directly with doctors and hospitals, a third-party administrator would be needed. "The biggest issue is the risk issue," Mosman said. "These are concepts that need to be discussed further."