How CalPERS Sets Health Premiums
We set health premiums annually through our rate development process. We negotiate methodically with health carriers to achieve the most competitive premiums possible for our members and employers.
We compare each plan’s premium proposal against actual cost and utilizations trends using data from our Health Care Decision Support System (data warehouse) to create baseline premium projections for each plan.
Find out how Risk Mitigation for Basic Plans affects health plan premiums.
Premium Development Timeline
Our health carriers submit proposals for changes to their existing health plans, service areas, benefit designs, and new plan products. The proposals include pricing, provider network and coverage, and benefit design information. Our Health Program team also prepares proposals that align with our Strategic Plan (PDF), promote improved health outcomes, and focus on preventive care.
We present the new plans, benefit designs, and service area proposals to the Pension & Health Benefits Committee (PHBC) for board approval. Approved Health Program Changes are brought forward into the rate development process.
We conduct the annual rate development process with health plans between February and July. Carriers provide claims data for us to analyze and compare with our own claims data. A standardized methodology for reporting costs and trends allows us to understand what’s driving costs in each plan.
We present initial premiums along with cost trends and assumptions to the PHBC during closed session.
Preliminary premiums are provided to PHBC in open session and shared with stakeholders, members, and employers. They're also sent to the Legislature as required by state law.
The board approves final health premiums during open session. Adopted premiums take effect January 1.
We examine the following when negotiating health premiums:
- Utilization trends, such as emergency room, hospital, and office visits
- Cost trends, such as the cost for services and pharmaceuticals
- Benefit design changes
Ultimately, health premiums must be affordable and sustainable for members and employers as stated in the CalPERS Health Beliefs.
Our Health Program is governed by the Public Employees' Medical and Hospital Care Act (PEMHCA), which requires that health premiums reasonably reflect the cost of the benefits provided. PEMHCA also establishes contracting agencies' minimum health premium contributions based on annual adjustments in the Consumer Price Index-Urban. These unique protections benefit employers as well as members.