CalPERS Endorses Measure to Tighten HMO Regulation

The California Public Employees’ Retirement System, one of the nation’s most influential health-care purchasers, has endorsed a November ballot measure that would tighten regulation of the managed-care industry.

The vote Wednesday by directors of the giant state pension fund is a potentially significant boost for supporters of Proposition 214, one of two similar but competing health-care measures.

Proposition 214 would protect doctors against retaliation for criticizing health plans and set “safe” staffing levels at hospitals, among other mandates.

The CalPERS board voted to take a neutral position on Proposition 216, which contains features similar to those in 214 but would also impose business taxes on certain health-care mergers and hospital closures and would create a new agency to oversee the state’s health-care industry.

Janet Maira, a spokeswoman for a business group opposing both measures, contended that CalPERS directors gave in to “tremendous pressure from special interest groups.”

CalPERS purchases medical benefits on behalf of nearly 1 million state employees, dependents and retirees. The agency has gained national attention by aggressively wielding its enormous buying power to demand that HMOs and other insurers slash medical premiums and provide more information on the quality of medical services. Insurers, in turn, have pressured doctors and hospitals to cut their fees, leading to reduced medical costs across the state.

Ironically, it is those very cost-cutting efforts by HMOs and hospitals that gave impetus to Propositions 214 and 216. Supporters of the measures--principally labor unions--contend the cuts have gone so far that they are harming patients and the overall quality of medical care.

Both measures are strongly opposed by the insurance industry and other business interests. They contend the measures are unnecessary, would raise medical premiums and, in the case of Proposition 216, impose tens of millions of dollars in new taxes.

The CalPERS board voted 8 to 5 to endorse Proposition 214, which is backed by the Service Employees International Union and two health-care advocacy groups, Health Access and Neighbor-to-Neighbor.

Among the board members voting to endorse Proposition 214 was State Controller Kathleen Connell, the top state official on the board, said Edward Fong, a CalPERS spokesman.