CA state workers’ and retirees’ premiums to increase 5% on average next year

California state employees will see smaller increases to their healthcare premiums compared to last year’s rate hikes following Tuesday’s approval of CalPERS’ 2027 health insurance rates.

The California Public Employees’ Retirement System board of administration approved a weighted average increase of 5% to healthcare rates during a Tuesday board meeting. The marginal increase continues a three-year trend of lower rate hikes compared to the previous year. Last year, CalPERS rates increased 8.2% on average.

The board also approved a deal to switch some plans from UnitedHealthcare to Sutter Health Plan due to what CalPERS staff described as “high and unjustified” rate increases proposed by UnitedHealthcare.

“These rates reflect CalPERS’ methodical approach to purchasing health coverage and holding plans accountable for cost and performance, rather than simply accepting the rates proposed by carriers,” CalPERS CEO Marcie Frost said in a Tuesday statement. “Our team has pushed to get the most competitive premiums possible for members while advancing better care across the program.”

Retired members of CalPERS will see the lowest increase to their healthcare premiums next year. Medicare plans will increase on average 0.5% in 2027. The Blue Shield Group Medicare Advantage PPO plan will see the largest increase next year with a rate hike of 14.82%. Several plans’ premiums are scheduled to decrease next year.

For active members, the average increase for basic HMO and PPO plans is 4.5% and 7.3%, respectively. The biggest increases in premiums will be for the Anthem Blue Cross Select HMO and the Blue Shield Access+ HMO and EPO plans, which are expected to grow by 11.38% and 10.82%, respectively.

In an announcement, CalPERS noted that next year’s rate increases are lower than national healthcare inflation rates. According to the accounting firm PricewaterhouseCoopers, commercial healthcare costs are expected to increase by 9% in 2027, largely due to “AI-enabled revenue optimization tools,” higher pharmacy spending and growing pressure to reimburse providers more.

CalPERS’ open enrollment period runs from Sept. 14 through Oct. 9.

Last month, CalPERS staff recommended that the board not renew a contract with UnitedHealthcare to offer two basic HMO plans to members, which covers about 94,000 members. These plans are not available to retired members.

Staff reported on Tuesday that UnitedHealthcare’s 2027 proposed rate increases for the Harmony and Alliance plans were 21% and 23%, respectively. CalPERS projected rate increases for those plans were significantly smaller. Because of the discrepancy between the rate increases, staff encouraged the board to switch to an HMO plan offered through Sutter Health Plan.

In a statement shared after CalPERS’ proposal to switch plans was made public, Steve Cain, CEO of UnitedHealthcare California, said that for more than a decade the company has delivered single-digit increases for CalPERS members.

“UnitedHealthcare’s proposed health premiums for CalPERS are competitive in relation to the benefits available under our plans and aligned with peer health plans within the CalPERS portfolio,” Cain said.

Rob Jarzombek, the chief of CalPERS’ Health Plan Research and Administration Division, said Tuesday that UnitedHealthcare’s proposed premium increases would have resulted in an additional $167 million that CalPERS employers and members would have had to pay next year.

The Sutter Health Plan was chosen because it will minimize disruptions to members on the UnitedHealthcare plans and will allow most members to continue seeing their current providers, Jarzombek said Tuesday.

“We are delighted to be working with such an exceptional partner in CalPERS to offer access to comprehensive coverage and high-quality, award-winning care,” said Aparna Abburi, CEO of Sutter Health Plan, in a Tuesday statement. “This selection reflects the value of bringing care and coverage together in a way that makes the healthcare experience more connected, coordinated and easier to navigate for patients. Our clear focus is to make it easier for CalPERS members to continue to receive care from Sutter physicians and teams they know and trust.”

CalPERS also recently added a benefit covering medical costs for in vitro fertilization across all basic plans, including PPO and HMO plans, beginning next July.

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