How CalPERS Sets Health Rates
We set health rates, also known as health premiums, by way of our annual rate development process. We negotiate methodically with health carriers to achieve the most competitive rates possible for our members and employers.
We compare each plan’s rate proposal against actual cost and utilizations trends using data from our Health Care Decision Support System (data warehouse) to create baseline projections for each plan. Cost- and quality-conscious board actions have also helped moderate increases for more than 20 years.
Find out how Risk Mitigation for HMO Basic Plans affects health plan premiums.
Rates Development Timeline
CalPERS health carriers submit proposals for changes to their existing health plans, service areas, and benefit designs as well as for new plan products. The proposals include applicable pricing, provider network and coverage, and benefit design information.
CalPERS presents the new plans, benefit designs, and service area changes to the Pension & Health Benefits Committee (PHBC) for board approval. Approved proposals are brought forward into the rate development process.
CalPERS conducts the annual rate development process with health plans between February and July. Carriers provide claims data for CalPERS to analyze and compare with our own claims data. A standardized methodology for reporting costs and trends allows CalPERS to understand what’s driving costs in each plan.
CalPERS presents 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.
CalPERS' final health premiums are approved by the board during open session. Adopted premiums take effect January 1.
CalPERS and its carriers examine the following when negotiating health rates:
- 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.
The CalPERS 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.
Health Plan Evaluation
The sustainability of the health program is the foremost consideration when reviewing proposed changes to plans, benefits, coverage areas, and costs.
If a plan requests to join or leave the program or certain service areas, we meticulously study the impact on members access to care and cost.
We prioritize comprehensive care options, quality, cost containment, and program sustainability for the long term. We ensure our 1.5 million members receive best-in-class health benefits.