Case Study: CalPERS achieves $600 million in cost avoidance with Truven Health Analytics

Rate Negotiations Result in $600 Million in Cost Avoidance

The California Public Employees’ Retirement System (CalPERS) manages health benefits for about 1.3 million members and oversees a $6 billion program—making it one of the largest purchasers of health insurance in the U.S. Historically, proposed rate increases from health plans varied widely and CalPERS lacked the analytic capacity to challenge them; an aging workforce and high dependent population further strained efforts to negotiate affordable rates.

In 2003 CalPERS partnered with Truven Health Analytics to deploy the Advantage Suite and a data warehouse that let staff analyze claims, lab, eligibility and performance data independent of plan submissions. Armed with this insight, CalPERS built performance-based measures into contracts and negotiated better rates—avoiding $37 million in the first year and ultimately realizing cumulative cost avoidance of $600 million by 2010, while achieving the lowest premium increases in 14 years and improving the ability to measure quality of care.

CalPERS

Kathleen Donneson

CPHIT, CPEHR Assistant Chief Office of Health Policy & Program Support