July 29, 2009
Office of Public Affairs
Contact: Brad Pacheco, Assistant Chief
CalPERS Health Premium Holiday for PPO Members and Employers One Step Closer
SACRAMENTO, CA – Members and employers enrolled in the California Public Employees’ Retirement System’s (CalPERS) self-funded preferred provider organization (PPO) plans will soon get two months of relief in the premiums and contributions paid for their health care.
Assembly Bill x4 12 was signed yesterday by the Governor as part of the State’s new budget that made a technical change in the State law to allow CalPERS to use more than $265 million in excess reserves to offset health premiums for two months. CalPERS members and employers can expect to see the savings in the Fall. CalPERS will post notifications on the exact timing on its website.
“These savings to our members, the State and our contracting agencies couldn’t come at a better time,” said Rob Feckner, President of the CalPERS Board. “Our PPO members have been doing their part by making cost effective health care decisions and these savings belong to them as well as the State and our public agencies.”
CalPERS plan, which was approved by its Board in April, will mean an average savings of $134 over two months for 324,000 CalPERS members and retirees enrolled in its PPO plans, a total savings of more than $43 million over two months.
It also frees up nearly $131 million for the State of California, and more than $91 million for over 1,140 contracting agency employers – entities that have been struggling with budgetary shortfalls and revenue loss.
“We will be working with the State and our contracting agencies to implement this plan as quickly as possible,” said Anne Stausboll, CalPERS Chief Executive Officer. “Once the savings are passed along to our employers, it will be up to them to ensure that they get to our members.”
Each year, CalPERS looks at actual health care cost and utilization by its PPO members, and projects what the claim costs will be for the coming year while maintaining a prudent level of reserves to keep the plans fully funded. Any assets above this level are referred to as “excess reserves.”
For the past few years, CalPERS claim cost projections have been higher than actual experience, due to lower-than-expected costs in PPO medical and pharmacy claims. This is a result of PPO members increasing their use of generic drugs and having fewer hospital admissions.
CalPERS is the nation’s largest public pension fund with more than $185 billion in market assets. It provides retirement benefits to more than 1.6 million State, school, and local public employees, retirees and their families, and health benefits to nearly 1.3 million members. For more on CalPERS, visit www.calpers.ca.gov.