Blue Shield of California has lost its long-time exclusive HMO contract with the California Public Employees' Retirement System (CalPERS) as the agency has added four additional insurers to its HMO contract.
CalPERS, the third largest healthcare buyer in the nation and Blue Shield's largest customer, spends about $7 billion each year for its 1.3 million members, including 400,000 public workers and their families with coverage through Blue Shield of California's HMO plans since 2003.
But the CalPERS board of directors chose four new HMO plans--Anthem Blue Cross, UnitedHealth, Sharp Health Plan and Health Net--to receive five-year contracts alongside Blue Shield. All five insurers will have to share coverage for the 400,000 people that Blue Shield previously exclusively covered beginning next year, according to an announcement from the pension plan.
The move is intended to help increase innovation while lowering healthcare costs. But Blue Shield CEO Paul Markovich told the committee that diluting its membership actually hampers its ability to create innovative and cost-effective programs, reported the Sacramento Business Journal.
He added that Blue Shield already has moderated costs for CalPERS partly by cutting high-cost hospitals from its network. "I am perplexed by your confidence that you have a good feel for what the costs will be for multiple HMO options," Markovich said, adding that new insurers won't necessarily result in better results, the Los Angeles Times reported.