wfn.org | Board of Pensions May Withdraw from HMO Participation

[PCUSA NEWS <pcusa.news@ecunet.org>]

14-July-1999 
99238 
 
    Board of Pensions May Withdraw from HMO Participation 
 
    Soaring Rates Prompt Search for Alternatives 
 
    by Jerry L. Van Marter 
 
PHILADELPHIA - The Presbyterian Church (U.S.A.) Board of Pensions, stung by 
predictions of Health Maintenance Organization (HMO) renewal rate increases 
of as much as 32 percent for the year 2000, may just get out of the HMO 
business altogether. 
 
    During a meeting here on July 10, the board authorized its staff to 
make the best deals possible with the 48 HMOs in which it participates. It 
also asked the staff to look into the possibility of simply not renewing 
its HMO contracts for 2001. In that event medical plan members would revert 
to the board's Preferred Provider Organization (PPO) arrangement, an 
organization of medical providers that offers discounted fees for health 
care services in areas where the network is available. 
 
    While health care costs have been volatile for years, the board seemed 
disappointed but not totally surprised by the rapid inflation in the HMO 
market. 
 
    "We hadn't anticipated the magnitude of these proposed increases," 
Margaret Mellen, the board's vice president for health care design, told 
its Healthcare Committee on July 9. A preliminary recommendation mailed to 
board members before the meeting sought permission to negotiate individual 
HMO increases up to 10 percent, with an aggregate increase for 2000 of no 
more than 8 percent. 
 
    When the renewal proposals came in, it soon became clear that those 
figures were unattainable.  Of the first 36 proposals received - which 
didn't include any from California, where sizable increases are anticipated 
- the aggregate increase approached 12 percent. In St. Louis, United 
Healthcare proposed a 32.5 percent increase. 
 
    John Cookson, the board's medical actuary, told board members, "It 
looks like we'll see these big increases again next year." 
 
    The Healthcare Committee discussed freezing enrollment in HMOs, but 
decided instead to inform incoming HMO participants that a study is under 
way that could lead to a withdrawal from all HMOs. 
 
    The board heard some encouraging news about the more flexible PPO 
programs in which it participates. A successful PPO network continues in 
Alabama and the staff announced the approval of a contract with Highmark, a 
Pittsburgh-based Blue Cross/Blue Shield PPO, to provide coverage  in 
Pennsylvania, Delaware and Puerto Rico beginning Jan. 1, 2000.  John Jasin, 
the director of health care delivery, said he expects the Highmark PPO to 
save the board $1.1 million annually in Pennsylvania alone while providing 
broader network access for plan members. 
 
    Former board member Beach Hall, who now serves as a co-opted member of 
the Healthcare Committee for the coming year, urged the board "to keep 
looking for other `Blues' [Blue Cross/Blue Shield PPOs] as alternatives to 
the HMOs." 
 
                   Prescription Drug Program Restructured 
 
    Faced with a 20 percent increase in the cost of its prescription drug 
benefit - a hike of about $4 million - the board voted to move to a 
"three-tier" fee structure for prescription drugs and to increase the 
co-pays on prescriptions by one dollar in 2000. 
 
    Jasin told the board, "There is no silver bullet to solve the rising 
costs of prescription drugs." He said there are two important factors in 
driving up drug costs: the rapid development of new, higher-priced drugs, 
and the growing trend of pharmaceutical manufacturers to market those new 
drugs directly to consumers. 
 
    As an example, he showed a luggage tag from a major American airline 
that has a tear-off discount coupon for Claritin, a new prescription 
antihistamine. 
 
    The new system includes a first tier of generic drugs, a second tier of 
brand-name "formulary" (a list of standard, covered) drugs, and a third 
tier of "non-formulary" drugs. The co-pay for tier-one drugs will rise from 
$6 to $7; for tier-two drugs it will go from $14 to $15. The co-pay for 
tier-three medications will be $30. 
 
    Recognizing the substantial additional cost generated by the use of 
non-formulary drugs, the co-pays will not count against the $600 annual 
out-of-pocket maximum for drug plan members. Mellen said there will be an 
appeals process for plan members who feel they must take non-formulary 
drugs for medical reasons. 
 
    Prescription drugs account for 15 percent to 20 percent of the medical 
costs of active plan members, but a whopping 60 percent to 65 percent of 
the cost of the board's Medicare Supplement plan. To ease some of the 
financial pressure on that plan, the board authorized a transfer of $1 
million from the assistance programs account to the Medicare Supplement 
account in 2000. 
 
                   Westminster Gardens to Get a Facelift 
 
    The board approved the Westminster Gardens "master plan" that included 
a tax-free bond issue to finance a $17 million renovation and expansion of 
the board's retirement facility in Duarte, Calif.  The financing package, 
which must be brought back to the board for final approval, calls for a 
guarantee by the board of the bond issue. 
 
    Key elements of the project are the construction of more than 60 new 
housing units on the 33-acre campus; the demolition of the current medical 
center building and the construction of a new state-of-the-art "Quality of 
Life Center" and assisted-living units; and the relocation of some 
maintenance and storage facilities to the campus perimeter to make the rest 
of the campus safer for walking. 
 
    "We have neglected Westminster Gardens over the years," said Conrad 
Rocha of Albuquerque, the chair of the board's Assistance and Retirement 
Housing Committee. He added that "if we do nothing, those who are there 
will stay (during the renovation), but no new folks are going to move 
there. This renovation will make Westminster Gardens a going concern that 
will be self-supporting and marketable." 
 
    Project planners estimate that Westminster Gardens will lose $1 million 
between now and 2003, when the project is completed, but will then be 
"positioned" to generate a surplus of about $400,000 a year.  The new 
planned "garden homes" will sell for about $140,000 and will be constructed 
as they are purchased. 
 
    The guarantee by the board will make below-market financing (at between 
5 and 6 percent) available for the project.  The Retirement Housing Fund - 
the specific source of the loan guarantee - now has a balance of $40 
million, according to vice president of church relations the Rev. Paul 
Stavrakos. 

 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
  This note sent by Office of News Services, 
  Presbyterian Church (U.S.A.)
  to the World Faith News list <wfn-news@wfn.org>.
  For additional information about this news story,
  call 502-569-5493 or send e-mail to PCUSA.News@pcusa.org

  On the web:  http://www.pcusa.org/pcnews/

  If you have a question about this mailing list, 
  send queries to wfn@wfn.org