Benefits May 15, 2003

CalPERS Green Lights New Health Program

May 15, 2003 (PLANSPONSOR.com) -The California Public Employees' Retirement System (CalPERS) approved a new health insurance plan aimed at cutting costs, improving treatment and adding patient choice.
Reported by

The move by CalPERS, the largest US pension fund, which administers benefits on behalf of California public employees, is sure to be closely watched by employers around the country. They, like CalPERS, are struggling to cope with spiraling health costs without robbing their employees of needed medical coverage. The CalPERS pension fund is the third largest purchaser of employee health benefits after the federal government and General Motors Corp.

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According to a Reuters news report, CalPERS officials said a key element of the plan was to provide better price stability by establishing longer term contracts with partners. To that end, it said it plans to put in place new multiyear HMO contracts with Blue Shield shortly.

The new plan also requires that HMOs give network doctors and hospitals incentives to follow treatment practices that are clinically proven to be effective. In addition, it provides for the formation of a coalition with other large health care purchasers to share information and collaborate in an effort to gain more negotiating clout in the marketplace.

“The underlying forces driving health care premiums in recent years are killing prospects for affordable health care: high cost of chronic conditions like diabetes and asthma, escalating hospital costs, and out of control prescription drug price hikes,” Sid Abrams, chairman of CalPERS’ Health Benefits Committee, said, according to Reuters. “Even this plan is not a panacea for solving the health care crisis. But it will help our members get more for the health care dollar and bring our partners in line.”

Also as part of the new health benefits program, the CalPERS’ Board voted to push for legislation that would give it authority to set up a regional pricing plan and alternative benefit designs for local public agencies and schools. The move effectively gives CalPERS the option to pursue such strategies in the future.

CalPERS said it was interested in regional pricing because it believed some public agencies were leaving CalPERS in favor of less expensive plans. Without regional pricing, it said, more public agencies probably will leave CalPERS, causing further cost increases to all the remaining agencies.

Investing May 14, 2003

WSJ: S&P To Start Ranking REITs

May 14, 2003 (PLANSPONSOR.com) - More than 90 real estate investment trusts (REIT) are expected to join the ranks of the Standard & Poor's (S&P) earnings and dividend quality-ranking system.
Reported by

Although still awaiting a formal announcement by S&P, the inclusion would take effect sometime this month.   The move comes only two years after S&P began including some REITs in its 500-stock index as Wall Street is increasingly warming up to the sector that has had an average 7% yield over the past three years, according to a Wall Street Journal report.

Raymond Mathis, REIT equity analyst at S&P told the Wall Street Journal the decision to include REITs was spurred, in part, by the amount of phone calls he said S&P fielded from institutional investors who wanted to invest in REITs. The reason for the demand are some institutional requirements of a high S&P quality ranking.   In general, the rankings, graded on a scale of A-plus to C, with A-plus signifying the company has the strongest dividend and earnings growth, appear on the front of S&P’s stock reports, which are available to individual and institutional investors, mutual funds, and financial advisers who subscribe to S&P.

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The rankings are calculated annually. But they can change before a year ends if there’s a major dividend cut, or bankruptcy in the interim.   However, the rankings are less a predictor of future performance than a look at how companies perform over time, based on the system’s approach of appraising the growth and stability of earnings and dividends on individual companies, based on per-share earnings and dividend records over the past 10 years.

Thus far, the only REITs assigned A-plus ratings are shopping-center ownersKimco RealtyCorp. andMid-Atlantic Realty Trust, of Lutherville, Md.   To see the complete rankings for REITs, investors can visit  www.standardandpoors.com  and click on “Equity.”

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