Health Plan Weekly

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%. 

Recent analyses from the Congressional Budget Office (CBO), Centers for Disease Control and Prevention (CDC), and the Urban Institute all demonstrate the impact that’s been made by the supersizing of Affordable Care Act exchange subsidies — as well as the damage to coverage rates and insurance markets that could be wrought if they aren’t extended past 2025.  

The enhanced subsidies have been in place since March 2021 after the passage of the American Rescue Plan Act. They both increased the level of advance premium tax credits available to lower-income individuals (making $0-premium plans widely available to that cohort) and expanded eligibility for APTC to middle-income Americans for the first time.  

Ever since racial justice activism swept the country in 2020 following the death of George Floyd, racial disparities in health care have become a focus in the health care industry. Perhaps even more than in recent years, health equity was one of the most-discussed topics at the AHIP 2024 conference in Las Vegas. 

But presenters at the conference made clear — as have their counterparts at other industry meetups — that health equity is a work in progress. Awareness of racial health disparities may be at an all-time high, but tangible progress is as elusive as ever. 

If enhanced Affordable Care Act subsidies are extended past 2025, 17.4 million people would receive subsidized coverage next year, compared with 10.2 million if only original advance premium tax credits (APTC) are in place, a recent Urban Institute analysis shows. Meanwhile, four million more uninsured people will be covered in 2025 if the subsidy enhancements are extended.

The enhanced APTCs — which were initially passed as part of the 2021 American Rescue Plan Act and extended as part of the 2022 Inflation Reduction Act — resulted in lower premiums for ACA marketplace enrollees at all income levels and allowed many low-income enrollees to access $0-premium plans. If Congress doesn’t act, the credits will expire at the end of the 2025 plan year.