Health Reform Might Wipe Out State Employees’ Plan : Insurance: California officials lobby Congress to preserve a system they say provides quality health care at low cost. Even the Administration praised it.

California’s health benefits plan for public employees, often hailed by the Clinton Administration for providing quality care while curtailing inflation, would be wiped out if the President’s health care reform package is approved by Congress.

The 926,000 active and retired public employees, together with members of their families, are enrolled in a single statewide system. But they would be divided among new regional health alliances under the Clinton plan.

“One of the most efficient programs in the country would be eliminated,” said Assemblyman Sal Cannella (D-Modesto), who is visiting Washington today to lobby members of Congress to preserve the state system.

“Everything the President wants to do in the nation, we’re doing successfully in California,” said Cannella, chairman of the Assembly’s pension committee.

The Clinton health blueprint requires that all government workers be included in the regional health alliances, along with most workers in private companies. The President originally proposed that firms with more than 5,000 workers could remain independent, but Treasury Secretary Lloyd Bentsen recently suggested that the threshold could be much lower, an effort to attract business backing.

But on enrollment of government employees, the Administration has refused to compromise despite repeated appeals from California officials, sources said.

The health benefits program is a division of the California Public Employees’ Retirement System, which runs the nation’s largest public pension fund. There are 850 government units enrolled in the health program, ranging from the California public employees’ group--with 626,000 workers, retirees and family members--to the two workers at the Antelope Valley Mosquito Abatement District.

CalPERS negotiates on their behalf with health maintenance organizations and insurance companies. It has required all firms to offer a standard package of benefits and has held total spending increases to just 1.4% for the current program year. Firms in private industry, by contrast, have been facing double-digit hikes in their health costs.

“We’re certainly very proud of what we’ve been doing,” said William Crist, president of CalPERS. “This year we expect to have another demonstration of the power of tough bargaining and large-scale purchasing,” he said.

Crist will join Cannella here today in trying to persuade members of Congress that CalPERS and other successful public-employee health programs should be allowed to remain intact. They want an exemption from the Administration’s insistence that all public employees must be placed in the proposed health alliances, which would negotiate with insurance companies, HMOs and networks of doctors and hospitals.

“We’re going to take our case to members of Congress, “ said Crist, professor of economics at Cal State Stanislaus and one of the six elected members of the CalPERS board. “It’s not like we’re going around the Administration. We’ll continue to meet and discuss with both the Administration and Congress.”

The message he offers is a simple one: Don’t mess with success.

“Our program cuts across the whole state, with a large group of people neatly tied together,” he said. CalPERS spends $1.6 billion a year in premium payments on behalf of members, giving it strong financial leverage throughout the state in dealing with HMOs and insurance companies.

Under the Clinton plan, “people would go into different regional alliances, and some of them would not be able to negotiate as good deals as others,” he said. “You also would have a lot more bureaucratic problems.”

California law makes members of the CalPERS board legally responsible for the program. “If somebody gets cheated or harmed by the system, we can be sued, we are all personally liable,” Crist said.