June 21, 2017

Communications & Stakeholder Relations
(916) 795-3991
Brad W. Pacheco, Deputy Executive Officer
Wayne Davis, Chief, Office of Public Affairs
Contact: Jeanie Esajian, Information Officer

Changes include adding Western Health Advantage as a new HMO choice

SACRAMENTO, CA - The California Public Employees' Retirement System Board of Administration today approved health care rate and plan changes for 2018 that include an average 2.33 percent overall premium increase. Individual plan increases may vary, but the overall Medicare and Basic (non-Medicare) increase is the lowest in 20 years.

Other changes for 2018 include the addition of a new health plan offering and expansion of Value-Based Purchasing Design procedures; which have shown to significantly reduce costs without affecting quality.

Lower overall premiums were driven largely by an average decrease of 2.5 percent for Preferred Provider Organization (PPO) plans. Premiums for members enrolled in Health Maintenance Organization (HMO) plans increased an average of 3.71 percent, including an 8.2 percent increase for Kaiser.

CalPERS Medicare plan enrollees will see premiums increase by 1 percent overall, with HMOs rising an average of 4.27 percent and PPOs averaging a decrease of 2.04 percent.

The rates will take effect on January 1, 2018.

"We're pleased with our overall success this year in keeping premium costs down," said Rob Feckner, president of the CalPERS Board. "CalPERS is an industry innovator in exploring ways to reduce health care costs while maintaining quality. We're committed to continuing our efforts to contain costs across all our health plans."

Among notable health plan and benefit changes for 2018 are:

  • The addition of Western Health Advantage to the Basic HMO choices for members in Placer, El Dorado, Sacramento, Yolo, Colusa, Solano, Napa, Sonoma, and Marin counties
  • Expansions of Health Net SmartCare to the Placer County cities of Lincoln, Loomis, Roseville, Rocklin, and Granite Bay
  • Expansion of Kaiser Permanente to 13 counties in Washington state
  • PPO benefit changes that add 12 procedures to the Value Based Purchasing Design to encourage use of appropriate and cost-effective care settings
  • The addition of the well-regarded SilverSneakers community fitness program to the PPO Medicare supplement plans

Over the past several years, CalPERS has successfully negotiated low premium increases compared with other large purchasers of health care. A benchmark analysis by the consultant firm Mercer showed CalPERS' premium increases for the 2014-17 period were markedly lower than Mercer's national survey average in all but 2016.

View detailed information on 2018 rates by HMO (PDF) and PPO (PDF) plan types for active and retired members.

The 2018 rates were negotiated in the second year of a multi-year revision of the rate development process CalPERS uses that allows for better identification and isolation of factors that increase health care costs. The process employs a risk-adjusted calculation to ensure that the financial risk of covering both healthier and sicker members is spread evenly among the health plans. Only one of the 15 Basic plans offered by CalPERS had a double-digit premium increase.

"Our negotiations team worked very hard on our members' behalf to get the best rates possible for next year," said Priya Mathur, chair of the Pension & Health Benefits Committee. "We were able to keep overall premium increases low and still expand the offerings and quality of our program."

View the CalPERS Board Meeting Highlights video, in which Liana Bailey-Crimmins, CalPERS chief health director, comments on the 2018 health plan rates and the effort to restrain health care costs.

CalPERS is projected to spend an estimated $9.1 billion in 2018 to purchase health benefits for 1.4 million active and retired state, local, and school employees and their families.

CalPERS members can make changes to their health plan choices during the annual Open Enrollment period, September 11 to October 6, 2017. Open Enrollment materials and information on health plan options will be available through members' myCalPERS accounts beginning August 28, 2017.

About CalPERS

For more than eight decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 1.8 million members in the CalPERS retirement system and administers benefits for more than 1.4 million members and their families in our health program, making us the largest defined-benefit public pension in the U.S. CalPERS' total fund market value currently stands at approximately $324 billion. For more information, visit www.calpers.ca.gov.