California Pension System To Consider Tiered Hospital Plans Next Year

The California Public Employees Retirement System may move to a tiered hospital plan that would require members to pay higher out-of-pocket costs at more expensive hospitals, the AP/Sacramento Bee reports (Sacramento Bee, 8/17). Under tiered hospital plans, health insurers require members who receive care at more expensive hospitals to pay hundreds of dollars in additional copayments. According to health insurers, employers who decide to participate in tiered hospital plans can save as much as 20% on the cost of health insurance premiums (Kaiser Daily Health Policy Report, 6/10). Documents released by CalPERS on Aug. 16 said that the "dysfunctional" health insurance market requires "drastic restructuring" to reduce costs. CalPERS officials also said that HMOs and PPOs no longer reduce costs "sufficiently." Paul Ginsburg, president of the Center for Studying Health System Change, said that tiered hospital plans appear "better than raising premiums across the board or limiting every employee's health care options." However, hospitals in the state said the two companies that offer tiered hospitals plans -- PacifiCare of California and Blue Shield of California -- use the plans to reduce costs "with no regard to the quality of health care." Nabil Musallam, who handles managed care contracts at the University of California-Davis Medical Center, said, "If CalPERS comes up with a way to establish tiers that truly account for costs and quality, that would lend real credibility to this idea." The move to a tiered hospital plan in CalPERS, the largest purchaser of health insurance after the federal government, could lead to a new trend in the national health insurance market, the AP/Bee reports (AP/Sacramento Bee, 8/17).