Pen­sion fund’s HMO costs to rise 7%

CalPERS, bell­wether of healthcare rates, points to drug prices for much of the boost.

Los Angeles Times - - BUSINESS - By Chad Ter­hune

One of the na­tion’s big­gest healthcare buy­ers, the Cal­i­for­nia Public Em­ploy­ees’ Re­tire­ment Sys­tem, said its HMO premi­ums are ris­ing by 7.2% next year as drug costs climb.

Rates for PPO, or pre­ferred provider or­ga­ni­za­tion, plans are go­ing up even more at 10.8%, on av­er­age, for 2016.

The sharp in­creases mark a de­par­ture from two years of more mod­est in­creases of about 3% at the gi­ant pen­sion fund.

The agency’s rate in­creases are closely watched across the coun­try as a harbinger of what big em­ploy­ers and their work­ers might be fac­ing. CalPERS spends $8 bil­lion an­nu­ally on med­i­cal care for 1.4 mil­lion ac­tive and re­tired state and lo­cal gov­ern­ment em­ploy­ees and their fam­ily mem­bers.

Al­most half the price in­crease for HMO and PPO poli­cies was the re­sult of drug costs, ac­cord­ing to CalPERS. Some of the prici­est drugs for the agency, in terms of over­all spend­ing, were acid-re­flux pill Nex­ium, asthma in­haler Ad­vair and hep­ati­tis C drug So­valdi.

The higher costs at CalPERS might be fur­ther ev­i­dence of an ac­cel­er­a­tion in U.S. med­i­cal spend­ing — af­ter a his­toric slow­down in re­cent years. Ex­perts see spend­ing ramp­ing up as the econ­omy strength­ens and more peo­ple ob­tain cov­er­age un­der the Af­ford­able Care Act.

Re­cent U.S. cen­sus data show that health spend­ing grew 7.3% in the first quar­ter of 2015 com­pared with the same pe­riod last year.

“For many years, CalPERS has been a bell­wether of which di­rec­tion healthcare costs are head­ing,” said Larry Le­vitt, se­nior vice pres­i­dent at the non­profit Kaiser Fam­ily Foun­da­tion. “Their pre­mium in­creases now add to a mount­ing body of ev­i­dence that costs are trend­ing back up.”

But Le­vitt and other health-pol­icy ex­perts don’t see a re­turn to the dou­bledigit in­creases of the early 1990s be­cause of ef­forts

aimed at elim­i­nat­ing waste­ful spend­ing and re­ward­ing qual­ity care.

U.S. work­ers have a lot at stake over ris­ing in­sur­ance premi­ums be­cause wages have re­mained fairly stag­nant dur­ing the eco­nomic re­cov­ery.

Like CalPERS, many large em­ploy­ers are weigh­ing their health in­sur­ance op­tions in prepa­ra­tion for open en­roll­ment for em­ploy­ees this fall.

The Cov­ered Cal­i­for­nia ex­change, which has more than 1.3 mil­lion in­di­vid­u­als en­rolled, is pre­par­ing to ne­go­ti­ate with health in­sur­ers, and 2016 rates will be an­nounced next month. Many an­a­lysts ex­pect rate in­creases to sur­pass this year’s av­er­age boost of 4.2% statewide.

The CalPERS Board of Ad­min­is­tra­tion gave fi­nal ap­proval to its 2016 rates Wed­nes­day, and they take ef­fect Jan. 1.

About two-thirds of CalPERS mem­bers are en­rolled in an HMO. Ac­tual rates will vary by health plan and re­gion.

Ann Boyn­ton, CalPERS’ deputy ex­ec­u­tive of­fi­cer for ben­e­fits, said the latest pre­mium in­creases stemmed in large part from big­ger phar­macy bills.

She said drug costs ac­counted for nearly 45% of the over­all rate in­creases for both HMO and PPO plans.

“CalPERS en­deav­ors to keep in­creases as low as pos­si­ble for mem­bers while still pro­vid­ing qual­ity healthcare, but phar­macy pric­ing pre­sented a high hur­dle to get over,” Boyn­ton said.

The agency listed some of its high­est-cost drugs for 2014, and So­valdi, the new hep­ati­tis C drug priced at $1,000 a pill, was near the top.

CalPERS said it spent nearly $40 mil­lion for So­valdi on plans run by Blue Shield of Cal­i­for­nia, Kaiser Per­ma­nente and CVS Health.

The high prices of spe­cialty med­i­ca­tions for hep­ati­tis C, can­cer and mul­ti­ple scle­ro­sis have drawn the ire of law­mak­ers, health in­sur­ers and pa­tients.

Among the four big­gest CalPERS plans by en­roll­ment, Blue Shield had the big­gest pre­mium in­crease. Its NetValue HMO plan is go­ing up 13.6%, on av­er­age, next year and its Ac­cess+ HMO is ris­ing 6.9%.

Mia Campitelli, a spokes­woman for Blue Shield, said its rate in­creases were driven by an uptick in doc­tor vis­its, hos­pi­tal ad­mis­sions and high-cost spe­cialty drugs such as So­valdi.

An­them Blue Cross is rais­ing rates by 11.8% for PERS Choice, the most pop­u­lar PPO. The com­pany de­clined to com­ment.

Kaiser’s HMO has the largest CalPERS en­roll­ment with more than 500,000 em­ploy­ees and de­pen­dents. Kaiser’s premi­ums are go­ing up 4.5%, on av­er­age, statewide.

CalPERS also of­fers Unit­edHealth, Health Net and Sharp Health cov­er­age.

For re­tirees, CalPERS ap­proved a new Medi­care Ad­van­tage plan from Unit­edHealth and elim­i­nated Medi­care cov­er­age from An­them, Blue Shield, Health Net and Sharp.

Agency of­fi­cials said the move could save $24 mil­lion if at least 40,000 mem­bers move into Unit­edHealth’s Medi­care plan.

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