Health Insurance:

California Public Employees' Alliance Has Reduced Recent Premium Growth

HRD-94-40: Published: Nov 22, 1993. Publicly Released: Nov 22, 1993.

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Pursuant to a congressional request, GAO reviewed the effectiveness of the California Public Employees' Retirement System's (CalPERS) Health Benefits Program in controlling its members' health plan costs, focusing on the: (1) program's cost-containment record; (2) factors that contributed to its trend in premium rates; (3) impact of its cost-containment efforts on its members' benefits; and (4) applicability of the program as a model for managing health insurance premiums.

GAO found that: (1) in contract years 1989 through 1992, the average CalPERS premium increased at a rate that was near or above state and national averages; (2) CalPERS has controlled the growth of health insurance premiums for participating employees since 1992 and its record is better than most other employers; (3) the factors that have contributed to the recent trend in lower premium rates include the state of California's economic and budget crises, more aggressive negotiations with providers, and the introduction of a standard benefits package that requires copayments for certain health services; (4) smaller premium increases in expensive health maintenance organizations plans are offset by higher copayments; (5) the premium increases in the least expensive plans are absorbed by the state government, but state employees are still affected by higher copayments; (6) some enrollees have gained services while others have lost services under the standard benefits package; and (7) it is unclear whether the CalPERS health benefits program controls health care costs while maintaining quality, since the program has adopted only some features of managed competition.

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