CalPERS Committee Recommends Lowest Health Premium Rates in 14 Years - Total Average Rate Increase of 2.9 Percent
Date: 6/16/2009 5:15:26 PM
CalPERS PRESS RELEASE, SACRAMENTO, CA – Members of the California Public Employees’ Retirement System (CalPERS) could see the lowest increase for health care in 14 years under a recommendation today by the CalPERS Health Benefits Committee.
The recommended overall 2.9 percent increase – which goes to the full Board of Administration tomorrow -- was achieved due to better health care practices by its members, and decisions and actions by the Board and staff that saved the program more than $600 million.
Under today’s recommendation, members enrolled in basic HMO plans would see a 3.4 percent premium increase, basic PPO plan members a 3.3 percent increase and a 1 percent increase for the pension fund’s association plans serving highway patrol, correctional and peace officers. Members in Medicare plans will see an average increase of 1.1 percent.
The proposed rates reflect:
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"This year’s rates are the result of many years’ of hard work and health initiatives which have reduced health care costs while driving towards higher quality care and better health outcomes," said Priya Mathur, Chair of CalPERS Health Benefits Committee. "Without these efforts, I have no doubt that rate increases would have been three times as high."
Today’s recommendation follows months of negotiations with health plan partners and research into new plan options that carried lower premiums but higher co-payments for office visits, prescriptions and deductibles.
"We considered different options that would have given our members more choices, "said Mathur. "However, we were concerned about the risks of higher co-payments, which could deter members from seeking needed health care, and of adverse selection, which could cause rates to rise dramatically over time."
"Overall, members would see very modest premium increases under this proposal," said Gregory Franklin, Assistant Executive Officer of the System’s Health Benefits Branch. "This is good news for members who have seen their pay cut and for our contracting agency employees who are experiencing similar fiscal constraints."
Recent health care trends and the rate package could represent welcomed news to the State of California. The 2.9 percent increase is far less than the increase the State was expecting. (For example, the original State of California OPEB Valuation projected a 9 percent increase for health care costs in 2010.) Other highlights of favorable news to the State include:
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Rates and more information can be found on CalPERS Web site at Finally, the CalPERS Board authorized $264 million of excess reserves in its PPO plans to be used to offset the premiums paid by the State, local agencies and members. This will provide an estimated $135.6 million to the State for other purposes. Earlier this year, CalPERS collected $62.8 million of State multi-year Medicare Part D subsidies to offset the general fund retiree health costs. The state will offset another $36 million by the end of the 2008/09 fiscal year, and a further offset of up to $35 million is likely for fiscal year 2009/10. The rate proposal may also lower the projected liability for future retiree health care. The 2008/09 liability forecast was $48.2 billion, an improvement of $2.2 billion over the initial estimate thanks to successful rate negotiations in 2009. Competitive health plan rates would lead to at least a $40 million reduction in the State’s FY 2009/10 retiree health care budget of $1.27 billion; This year’s plan introduces a new Blue Shield Medicare Advantage Part D plan in nine counties including Fresno, Kern, Los Angeles, Madera, Orange, San Bernardino, San Luis Obispo, Ventura and parts of Riverside; and brings the successful Blue Shield’s NetValue plan to four more counties including Imperial, San Francisco, San Luis Obispo, and parts of San Mateo. The results of many years of the Board’s strategic decisions which resulted in cost reductions and better health outcomes, including the removal of high cost hospitals, emphasis on health and disease management programs, the addition of NetValue and PERS Select low cost "high performance" health plans, the CHW/Hill Pilot, and stronger medical and pharmacy management. Tougher negotiations by CalPERS staff and proactive healthcare management by the health plans and their providers. Lower use of health care services and more extensive use of generic drugs by members and their families compared to previous years.
www.calpers.ca.gov., click on "About CalPERS", "Committee and Board Agendas", and "Health Benefits Committee."
CalPERS is the nation’s largest public pension fund with more than $180 billion in assets. It provides retirement benefits to more than 1.6 million State, school and local public employees, retirees and their families, and health benefits to nearly 1.3 million members.
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