The state's influential teachers pension fund voted Thursday to develop a model under which public school teachers could receive health benefits directly from doctors, rather than buying insurance through a traditional health plan.
Such an action, which has the potential to revolutionize the health-care market in the state, would essentially require the California State Teachers' Retirement System, or CalSTRS, to become a health plan, creating a complicated new bureaucracy and possibly exposing the fund to legal liability if care is not properly provided.
"I would not say it's a done deal at this point, although there is definite interest," said James Mosman, chief executive of CalSTRS. "The board has agreed to go ahead and let us take the next step, which is to study the concept in more detail."
The unanimous vote was part of a broader action by the CalSTRS board to formally investigate several methods for providing health benefits to its members.
Under the motion presented by state Controller Kathleen Connell, staff of the 500,000-member retirement system will study several options, such as contracting directly with doctors and hospitals for care and allowing teachers to opt into health benefits packages provided by the California Public Employees' Retirement System, the nation's largest public employee pension fund.
It is too early to tell whether the CalSTRS board will vote to move forward with direct contracting when the model is presented at its meeting in March.
Liability, Mosman said, is an important concern. "I don't want the system to become a $100-billion deep pocket as a health plan," he said.
CalSTRS today does not provide health benefits for its members, who are the state's active and retired public school teachers. Most of its members typically have access to health care through their individual school districts.
A group of older CalSTRS members may have no health coverage at all because they are not eligible for Medicare, a part of the Social Security system. They were left out because in 1950, before Medicare existed, the teachers voted to opt out of Social Security and set up their own pension system, STRS.
Under a direct contracting arrangement, STRS would bypass health plans and pay doctors and hospitals directly for patient care. A similar plan in Minnesota has saved a coalition of private-sector employers 11% on its annual health-care premiums.