CalPERS Adopts Health Rates With a 1.16 Percent Increase

SACRAMENTO, California, June 20 -- The California Public Employees' Retirement System issued the following news release:

The CalPERS Board of Administration today approved health care rate and plan changes for 2019 that include an average 1.16 percent overall premium increase, marking the lowest health premium increase CalPERS has negotiated in over two decades. Amid increasingly volatile health care markets across the industry, CalPERS continues to achieve historically competitive prices.

"Once again, we've negotiated premium increases that are among the lowest in the nation," said Rob Feckner, chair of the Pensions Health and Benefits Committee. "On top of the success we saw last year in keeping increases low, this is another sign how aggressive and successful we've been in maintaining quality of care and being diligent about costs on behalf of our members."

Members enrolled in CalPERS' Basic (non-Medicare) Health Maintenance Organization (HMO) health plans will see a 0.37 percent average premium increase. Members enrolled in Preferred Provider Organization (PPO) plans will see an overall average increase of 2.83 percent. CalPERS Medicare plan enrollees will see their premiums increase by an average 1.37 percent.

The new rates will take effect on January 1, 2019.

According to the PwC's Health Research Institute, health care costs for employers and insurers nationwide are projected to increase 6 percent in 2019.

CalPERS is projected to spend $9.3 billion in 2018 to purchase health benefits for 1.4 million active and retired state, local government, and school employees and their families. It is the second largest purchaser of health care in the country, behind the federal government.

Among notable health plan and benefit changes for 2019:

Overall rates for seven HMO plans will be less than the 2018 rates. About 800,000 CalPERS HMO Basic members (excluding those in association plans) are expected to see their premiums decline in 2019.*

Health Net will leave the Sacramento market in 2019.

Blue Shield Access+ will exit eight Bay Area counties in 2019: Alameda, Contra Costa, Marin, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma.**

Premiums for PERSCare are increasing by 19.8 percent, Anthem HMO Traditional by 22.96 percent, and Blue Shield by 6.21 percent.***

A pilot program for reference-pricing pharmaceuticals will begin with three therapeutic classes: Nasal corticosteroids, thyroid medications, and estrogens. Reference-pricing has been shown to improve transparency in drug pricing by offering members lower-cost therapeutic alternative drugs.

The PERS Select Basic PPO plan will adopt a value-based insurance design. The approach aims to improve quality and lower costs associated with health care by emphasizing primary care and introducing cost incentives to lower deductibles.

SpineZone, an online back and neck pain program, and Wisdom, a study to optimize breast cancer screening, will be available to PPO members.

"CalPERS continues to champion health care innovation to improve health outcomes and reduce costs," said Priya Mathur, president of the CalPERS Board. "Despite the volatility in health care, we're always looking for new and creative ways to add value for our members."

To offset the financial impact of changes in patient utilization and other medical cost increases, the Board adopted two "buy down" efforts. Using funds from its health reserve, CalPERS allocated funds to buy down the premium for its PERSCare PPO plan and premiums for Medicare PPO plans. While the buy down efforts help, PERSCare members will still see a 19.8 percent increase in 2019 premiums. New rates for members of the PERS Select PPO plan, however, will drop by 25.5 percent.**** All members should pay close attention to their health plan options during open enrollment.

"The buy down of PERSCare is intended to smooth premium increases over the next two years," said Liana Bailey-Crimmins, CalPERS health director. "We want to make sure that the 35,000 members who belong to PERSCare can reasonably plan for the increased costs."

The 2019 premiums reflect the Board's decision last year to stop risk-adjusting rates.

Detailed information on 2019 rates for active and retired members are available on the CalPERS website.

CalPERS members can make changes to their health plan choices during the annual Open Enrollment period, September 10 to October 5, 2018. Open Enrollment materials and information on health plan options will be available through members' my|CalPERS accounts beginning August 27, 2018.

For the first time, members will be able to access Open Enrollment information on an application designed specifically for mobile devices, to be announced later this summer.