SACRAMENTO – The CalPERS Board of Administration on Wednesday approved the lowest health benefit rate increase in a decade. The 2008 rate package will increase overall premiums by 6.3 percent. Basic HMO premiums will increase 7.4 percent.

Rob Feckner, chair of CalPERS Board of Administration, said the benefit package was the result of months of hard work and a great deal of effort in striking the right balance for the entire risk pool of members.

“This 2008 benefits program is substantially lower than what consultants are anticipating for U.S. employers next year,” he said. “More importantly, it is strategically aligned to deliver high standards of efficient health care and disease prevention, and achieve rate increases well below the average in today’s marketplace.”

For the large majority of CalPERS members, the 2008 program will bring new health plan choice, ensure a standardized disease management program, and save the State money in the last half of the current fiscal year.

The 2008 health care program will include:

• A $5 increase in HMO co-pays for office visits, standardized urgent care co-pays to $15 for HMOs and an annual out-of-pocket maximum ($1500 single, $3000 family) for Blue Shield. (Kaiser already had this maximum in place.)

• Free (no co-pay) office visits for many preventive care services.

• The addition of two new high performance health plans (Blue Shield NetValue and PERS Select) that will be less expensive in premium than the standard plans from Blue Shield and PERS Choice. (Current Blue Shield members who move to Blue Shield NetValue will pay a lower premium than they did in 2007. For example, a family moving from Blue Shield’s standard HMO plan into NetValue next year will save over $180 in premiums.)

• An HMO Medicare rate that is 1.6 percent less than last year.

• Withdrawal of Blue Shield’s HMO from the four costliest rural counties – Lake, Napa, Plumas and parts of El Dorado – and elimination of Sacramento-region based Western Health Advantage (WHA) because of WHA’s expressed inability to meet CalPERS requirement for data and disease management, and expressed reluctance to modify its business model to expand into more regions of the State.

All efforts to develop the 2008 health care program shaved $144 million off of initial plan proposals. The overall increase of 6.3 percent is less than one-half the average of increases in the previous five years.

 

Overall, CalPERS plans to spend $5.3 billion to purchase benefits for more than 1.2 million state and local government employees, retirees, and their families next year, up from $4.9 billion this year.

 

“We recognize that in this tough health care marketplace, a combination of approaches is necessary to keep rate hikes low and quality high. We have strategic health plan partners who share our vision, and are committed to helping us make that vision a reality,” said George Diehr, Chair of the Health Benefits Committee. “We will continue to pursue innovative, aggressive approaches with our health plans to get better value for our dollars, and provide our members with opportunities and incentives to obtain the highest quality of care at the most affordable price.”

The package benefits employers, who will have new high performance network offerings for many of their employees. The State of California, which had projected a 9.5-percent increase for health care costs, would also see some relief in its budget forecast for 2007-08. Based on a 6.3 percent hike, the State’s projection would be about $65 million less than anticipated.

This year’s rate package will also have an effect on the state’s retiree health benefits projection. In April, actuaries for the State Controller used a 10- percent increase assumption in the rise of health care costs. Staff estimated that the 6.3 percent rate increase would reduce the state’s long-term liability by roughly $1 billion to $1.6 billion, depending on how the state funds the liability in the future.

For additional information, visit www.calpers.ca.gov.

CalPERS is the nation’s third largest purchaser of employee health benefits and the largest in California, with 1.2 million state and public agency employees, retirees, and their dependents.

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