CalPERS currently spends $7 billion per year on health care coverage for its retirees. But with its tab set to increase by 10% next year alone, the pension giant is reevaluating how they provide coverage to their members.

1.3 million retirees received their benefits from Kaiser, Blue Cross and Blue Shield of California, or Anthem. Those plans will be rebid soon, and are currently under contract through December 2013. The non-Kaiser plans are going to be subject to rebidding. Currently the system spends the third most of any organization in the country. Only General Motors and the federal government spend more annually.

However, a second option is being considered, one that would call for the pension system to contract directly with large groups of physicians and providers. That shift would put a greater administrative burden on the service providers, as they assumed some of the duties carried out by insurance companies.

From the L.A. Times:

California’s biggest healthcare buyer isn’t happy about its $7-billion annual medical bill climbing almost 10% next year, and the state’s big insurers may be feeling the heat.

The California Public Employees’ Retirement System is preparing to rebid its health insurance business this fall for 1.3 million members, and two of its current plans, Anthem Blue Cross and Blue Shield of California, are likely to face intense competition as the giant pension fund considers its options.

Read the full article here.