Blue Shield-CalPERS Deal Could Alter Employer-Plan Landscape

CalPERS, the California state agency that administers state and local government employees’ benefits and retirement programs, on June 12 selected Blue Shield of California to administer the agency’s statewide PPO plan, which is projected to have about 400,000 members when the contract starts in the 2025 plan year. The size of the contract makes the deal notable, as does the fact that Blue Shield (which already administers a CalPERS HMO with approximately 175,000 members) will take CalPERS’ PPO business away from incumbent Elevance Health, Inc.  

But the structure of the contract itself is what has the health insurance business abuzz. In the new deal, Blue Shield will take on both upside and downside risk based on the plan’s rate of medical cost growth. According to a CalPERS press release, Blue Shield in 2029 stands to gain $31 million in additional fees if it can cut spending growth by 5.5% annually — but Blue Shield would have to pay the agency $61.5 million if it hits “observed trend compared to benchmark” of 5.5%.