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LOS ANGELES – The California Public Employees’ Retirement System, the nation’s second-largest health benefits provider, will lose $96 million this year on its self-insured health plans, according to a newspaper report. 

The Los Angeles Times reported Friday that CalPERS officials will consider double-digit rate hikes and higher co-payments in the next two years to offset some of the losses. 

The health fund’s reserves will drop to $73.1 million, enough to last six weeks should unexpected medical costs or other emergencies hamper the fund’s ability to draw from it regular cash flow to pay claims. The recommended industry standard is to have at least three months of reserves. 

The health fund losses will not impact CalPERS’ ability to pay retirement benefits to members or destabilize other programs. 

CalPERS attributes the losses to an increase in membership to its self-funded plans. The increase is largely from members in the state’s rural areas who are joining because health maintenance organizations are pulling out of the counties where they live. 

“This is the only option that is available statewide,” said Allen Feezor, CalPERS assistant executive officer for health. 

Unlike HMOs, which can leave when it becomes too expensive to operate, CalPERS is obligated to provide care for all its members no matter where they live. 

The result, Feezor said, is that the PERSCare and PERSChoice plans have suffered high increases in the cost of doctor and hospital visits, as well as high prices and increased demand for prescription drugs. 

About 22 percent of CalPERS’ 1.1 million members are enrolled in the two plans. The plans are preferred provider organizations where there is no primary-care gatekeeper and patients don’t need a referral to see a specialist. 

Premium increases will be instituted in 2001 that will average 19 percent more than this year, officials said. An increase of 24 percent is needed to stem the losses and premiums, deductibles and co-payments may be raised in 2002, Feezor said. 

The CalPERS board voted last month to increase by 300 percent the amount that some board members receive to attend meetings. The compensation for some board members, who attend about 75 meetings a year, will increase to an annual average of $30,000 from about $7,500 a year.