Calpers seeks health premium cuts to stem defections.

Public agencies in Southern California that buy health coverage through the California Public Employees Retirement System could see a premium discount exceeding 10 percent next year under a proposed regional rating system aimed at halting an exodus from the program.

Initial calculations performed by Blue Shield of California, one of two statewide HMO plans offered by Calpers to member agencies, show that premiums in Southern California could be l0 percent or more less expensive than in the northern part of the state, where health care costs generally run higher.

"In all likelihood it could generate in excess of a double-digit discount," said Paul Markovich, senior vice president of Blue Shield's Calpers business unit. "It would greatly benefit in particular Los Angeles County."

The massive Calpers system, which provides health coverage to 1,100 public agencies statewide in addition to current and retired state workers, had asked its contract insurers earlier flats month to develop a premium rating system that would better reflect regional health care costs.

The move followed a decision last year by 27 agencies, mostly in Southern California, to exit the health program following a 17 percent overall rate increase in premiums for 2004 and a 26 percent increase in 2003. Among the departures were the Beverly Hills Unified School District and the cities of Santa Monica and Torrance.

They were able to negotiate cheaper deals with health insurers on their own.

Calpers has feared that without a regional rating system. 100 or more public agencies may leave this year, given that premiums are once again expected to increase in the double-digits.

The Calpers health benefits committee is scheduled to consider the regional rating proposal on April 20, followed by the full board on April 21. In preparation, Calpers' contracted health plans have been developing projections for how much such a system could save Southern California member agencies.

Markovich said Blue Shield is still developing its plan, but that the figures look promising for Los Angeles County, which has some of the cheapest health care costs in the state.

Officials at Kaiser Permanente and Blue Cross of California, which administer Calpers' two self-insured preferred provider organization plans, declined to publicly state their own savings projections.

Among the issues to be determined by Calpers is how far they want to go with regional pricing a system that fully reflects cost differentials might subject northern participants to sticker shock, even though it's unlikely they could garner much savings on the open market.

The program would only apply to member public agencies, while current and retired state workers, who make up 62 percent of Calpers 1.2 million-member health program, would continue to pay uniform statewide rates.