California Gov. Gavin Newsom recently signed legislation that extends a pilot program enabling California’s school districts to partner directly with medical groups to purchase healthcare for their workforce. The pilot will now be in place for a full four years, as anticipated in the original California state legislation creating the pilot, AB 1124.
The pilot, an agreement between California Schools Voluntary Employees Benefits Association (VEBA) and members of America’s Physician Groups (APG), aims to introduce a value-based payment model designed to reduce overall healthcare costs while improving the quality of patient outcomes. VEBA administers healthcare benefits and programs for more than 153,000 members from over 73 employers and school districts.
In the first eight months of the pilot, which launched Jan. 1, 2024, VEBA has already reported $1 million in savings for nearly 5,000 enrollees, demonstrating the potential for even greater cost savings and improved care with this extension, APG says.
Both APG and VEBA applauded the pilot’s extension. “America’s Physician Groups applauds the Governor for signing AB 2063, which will allow California to continue exploring innovative payment models that lower health care costs and improve patient outcomes,” said Bill Barcellona, executive vice president of government affairs for America’s Physician Groups, in a statement. “VEBA has partnered with top-tier providers in the Western United States, including Sharp Healthcare, Rady Children’s Hospital, and the U.C. San Diego Medical Group and Hospitals. These providers are leaders in healthcare delivery, and their participation in this pilot further enhances its potential for success.”
“Direct contracting is groundbreaking,” said Laura Josh, general manager of California Schools VEBA, in a statement. “For the first time, California can assess how integrated care and risk-based payments can both lower healthcare costs and improve performance. This extension is a major milestone in our legislative efforts, and VEBA is proud to lead this first-of-its-kind program, made possible through Assemblymember Brian Maienschein’s leadership. VEBA is confident that the program will drive even greater savings and improve patient care for Californians,” she said.
Data from the Integrated Health Care Association at a recent Office of Health Care Affordability board meeting provided details on the pilot. Between the two major coverage models – HMO with capitated-delegated networks and PPO with independent fee-for-service networks – the rate of cost increase was 3.12% versus 9.93%, respectively, over a five-year period prior to the pandemic. This threefold difference highlights the critical need for innovative payment models like those tested in this pilot.
Oversight of the program is provided by the Department of Managed Health Care (DMHC).
