etroactive Reimbursement Liability for Health Premiums Important Notice Effective July 1, 2005

CalPERS - Limiting Retroactive Reimbursement Liability for Health Premiums Applied to
Dependent Changes Due to Marital Status, Death, Employment Changes, etc.

Effective July 1, 2005, CalPERS will limit event date transactions to no older than six months if
the notification date to the campus Benefits office is not done in a timely manner. This applies
primarily to dependent changes due to death, marital status, changes in employment
and other circumstances. As a CalPERS covered participating employer, CSU, Chico
is instructed to follow these timelines.

The recent amendments to California Code of Regulations (CCR), sections 599.502(f)(2) and
599.506©(1), limit the liability of health plans for reimbursement of health premiums to
members and employers to the amount of excess health premiums paid for a period of up to six
months prior to the date on which the action is processed and recorded, pursuant to the
members request for retroactive cancellation or deletion of the ineligible family member.

Members who fail to report an enrollment change in a timely manner could be liable
for retroactive reimbursement to their employer of premiums in excess of six
months prior to the date on which the action is processed and recorded. In
addition, members may be liable for costs incurred as a result of services delivered
to an ineligible dependent.

For additional information regarding the proposed changes, please refer to the attached
Frequently Asked Questions (FAQs).
You may also access the CalPERS web site at
www.calpers.ca.gov
or call the CalPERS Employer Contact Center toll free at (888) 225-7377.

For information regarding changes to your dependent status, please call Jennie
Roden, Benefits Coordinator, at (530) 898-4948.
























Frequently Asked Questions (FAQs) for Employers
Limited Retroactive Reimbursement Liability for Health Premiums
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What changes are made by the proposed regulation amendments?
Title 2 of the California Code of Regulations, sections 599.502(f)(2) and 599.506(c)(1), will limit
reimbursement of excess health premium payments to no more than six months; down from the
current CalPERS policy of no more than 36 months.

Who is affected by the proposed amendments?
All members (active state and contracting agency employees and retirees) and employers who
contract with CalPERS for health benefits will be affected by the proposed regulation
amendments.

When will the regulation changes become effective?
The regulation changes can become effective as early as July 1, 2005.

What are the benefits of the proposed regulation amendments?
Limiting retroactive reimbursements to no more than six months will reduce the health plans
liability for events over which they have no control. In turn, health plans will not seek to mitigate
these risks by increasing health benefit premiums for employers and members. CalPERS
should be able to negotiate better premium rates, which benefits both employers and members.

How will members be informed?
CalPERS will inform members of the regulation changes through a variety of means including
various publications and newsletters, Open Enrollment materials, the Annual Member Health
Plan Statement, payroll inserts, and the CalPERS Web site.

What is the maximum allowable refund amount for retroactive deletions under the
proposed regulation amendments?
The maximum allowable refund will be the amount of excess premiums paid for a period of up to
six months prior to the date on which the action is processed and recorded.

What are examples of retroactive reimbursement claims?
The following is an example of a retroactive reimbursement claim caused by failure of a member
to report a mandatory deletion in a timely manner:
An employee gets a divorce, which is effective on December 5, 2002; however,
the employee does not report the divorce until December 8, 2004. Coverage for
the former spouse is retroactively cancelled back to January 1, 2003. This
creates a retroactive health benefit premium overpayment for 24 months; the
reimbursement will be calculated for the last six months only.
The following is an example of a retroactive reimbursement claim caused by the employer not
recording a mandatory cancellation in a timely manner:
An employee separates from employment on January 5, 2003, which would cancel
the employees coverage effective March 1, 2003. However, the employer does
not update the employment record the transaction and continues to pay health
benefit premiums for the former employee. The employer updates their records on
December 10, 2004, retroactively canceling coverage for the former employee,
effective March 1, 2003.
This creates a claim for retroactive health benefit premiums for 22 months; the
reimbursement will be calculated for the last six months only.


Please see back
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When does health coverage end for a member who is retroactively deleted (mandatory
deletion)?
Termination of health coverage is effective the first day of the month following the event which
caused the deletion. For example, if a member gets a divorce, which is effective March 3, 2005,
the former spouses coverage ends as of April 1, 2005.

When does health coverage end for a member who is retroactively cancelled due to
separation from their employer (mandatory cancellation)?
Termination of health coverage due to separation is effective the first day of the second month
following the event which caused the cancellation. For example, if an employee quits May 5,
2005, coverage will be cancelled as of July 1, 2005.

When does health coverage end for a member who is retroactively cancelled due to
obtaining other group health coverage (permissive cancellation)?
Termination of health coverage due to obtaining other non-CalPERS sponsored group health
coverage is effective the first day of the month following the date the cancellation request is
received. For example, if an employee obtains other health coverage through his or her
spouse, effective December 1, 2004, but the request for cancellation is received May 5, 2005,
the members coverage ends as of June 1, 2005.

What are the consequences of failing to provide information regarding changes in
enrollment in a timely manner?
Members who fail to report changes in their health enrollments in a timely manner could be
liable to reimburse their employer premiums paid in excess of six months from the date the
change was recorded. In addition, members may be liable to the health plans for costs incurred
as a result of services provided to an ineligible dependent. Employers who do not record a
deletion or cancellation in a timely manner will not be entitled to retroactive benefit premiums
beyond six months from the date the cancellation is processed and recorded. If CalPERS fails
to process an enrollment change, it is our intent to make whole any parties who are adversely
affected.

Do retroactive transactions apply to dependents reaching age 23?
Dependent birthdates should be recorded in the health system and dependents are
automatically cancelled on the 1st of the month following the 23rd birth month.

What is the estimated cost savings for implementing the proposed regulation
amendments?
CalPERS could save an estimated $8 million dollars annually which will be reflected in future
health premium rates.

Why are retroactive reimbursements limited to six months?
CalPERS realizes that life events may delay members and employers from immediately
reporting health enrollment changes. However, because the majority of events (65%) are
reported and processed within 180 days of the event that caused the health enrollment change,
CalPERS has determined that a six-month period is a reasonable amount of time.

If a member is dissatisfied with a retroactive reimbursement decision, is there an appeal
process?
The Public Employees Medical and Hospital Care Act (PEMHCA) contains ample appeal rights
for members who are dissatisfied with a decision pertaining to health care coverage.

Where can additional information about the proposed regulation changes be found?
For additional information, visit the CalPERS Web site at www.calpers.ca.gov or call the
CalPERS toll free number at (888) CalPERS (225-7377).

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