CalPERS Members Choose Lower Costs Over Physician Choice

Faced with the choice between changing health care providers, or moving to a higher-cost plan, a large majority of California Public Employees’ Retirement System (CalPERS) members chose to switch doctors and hospitals and remain with a lower-cost HMO, CalPERS reported in December.

CalPERS—the third largest purchaser of employee health benefits in the U.S., with 1.2 million enrollees—said that preliminary open enrollment results for 2005 showed that 75% to 80% of Sacramento area members who were affected by the decision to remove Sutter Health physicians and hospitals from the Blue Shield network elected to remain with Blue Shield or move to another CalPERS HMO, rather than choose a PPO, which would have allowed them to continue to use Sutter Health.

Across California, the number of enrollees forced to choose between changing doctors or moving to a PPO totaled 48,000. Of these, 29,000 made changes, but the majority chose other HMOs over PPOs. CalPERS officials speculated that factors influencing members’ decisions about whether to switch plans may have included a desire for the lowest possible premiums, the impact of regional pricing on local agencies, and a range of costs among plans.

"Early indications show there was no member stampede to retain their Sutter doctor or hospital by moving to our preferred provider network," said Sid Abrams, chair of the CalPERS Health Benefits Committee. But, he added, "I want to emphasize that we don’t know all the reasons why affected members stayed in the Blue Shield HMO plan or went to other health maintenance organizations."

CalPERS excluded 24 high-cost hospitals from the Blue Shield lineup starting this year, a move the organization has said will save an estimated $36 million in 2005, and $45 million a year thereafter. CalPERS officials have said they will present a full analysis of the impact of the decision to drop these hospitals in February 2005.

CalPERS has also announced plans to meet with other large health care purchasers based in California and other states in 2005 to discuss initiatives aimed at improving health care quality while bringing down prices. In particular, CalPERS said it hopes to band together with other purchasers to conduct joint negotiations with health care providers.

"We achieved significant savings by collaborating in this way with Blue Shield to eliminate high-cost hospitals from the provider network going into 2005," Abrams said. "And we can make a much greater impact if other purchasers join us to leverage our combined numbers to change market dynamics."