LACERS Board Approves 5.2% Premium Reduction for 2005 Retiree Health Plans

The LACERS Board of Administration approved the addition of new medical plan providers and negotiated overall premium rate reductions of 5.2% with no reduction in benefits for LACERS' retirees. The changes will take effect January 1, 2005.

"The negotiations we successfully completed resulted in a reduced cost of $3.45 million. Retirees will benefit from a wider range of choices and some new services," noted Commissioner Ken Spiker, the retired Members' elected representative to the Board of Administration.

Two new medical plan providers - Blue Cross HMO and SCAN of Southern California - met the criteria of cost-effective premiums and quality care. Blue Cross HMO will replace PacifiCare for Retired Members under age 65. SCAN will provide an additional plan choice to Medicare eligible retirees. Through their Independent Living Power program, retirees who qualify can access additional services such as transportation to medical appointments, light housecleaning, and home-delivered meals, at no additional cost to the plan.

Board President Shelley I. Smith said, "We believe this excellent result is probably unique among other retiree healthcare purchasers given that annual increases have been in the double digits in each of the last four years." Premiums rose an estimated 18.2% in 2004.

As a result of the persistent premium increases over the past four years, the Board issued a Request for Proposal (RFP) in February 2004. The Board's decision to issue the RFP, higher reimbursements from Medicare, and each provider's positive financial position resulted in overall savings. According to Smith, "It was the best possible time and group of circumstances in which to vigorously negotiate premium rates for LACERS' benefit plans without sacrificing quality care."

"The current environment is a difficult one for pension plans to manage increasing healthcare costs for a retiree population," said LACERS General Manager Robert Aguallo, Jr. "We recognize that there is no single solution to the healthcare crisis," he said. As to the strategies employed by LACERS, Aguallo noted, "Our efforts demonstrate our commitment to our Members in terms they can readily understand and appreciate. They can feel comfortable and secure, as they enjoy the same quality healthcare with more choices in 2005."