Cheapest CalPERS health insurance plan will cost 23% more next year, projections show

Prices are going up 23% next year for California public employees enrolled in one of CalPERS’ cheapest health insurance plans, according to preliminary rates published Tuesday.

The price hikes for the 110,000 people enrolled in PERS Select PPO plans come as the retirement system moves to a new rate-setting system that officials say will stabilize prices over time and align plan prices more closely with their true value.

In addition to managing public employees’ pensions, CalPERS provides health insurance for more than 1.5 million people, including about 740,000 public employees and retirees and about 770,000 dependents.

The 23% jump, which amounts to a premium increase of $120 per month for a single person, is the largest of several hikes projected for CalPERS’ cheaper offerings next year.

Its more expensive plans, on the other hand, will drop in price by up to 15% under the new rate-setting program.

The rates CalPERS posted to its website Tuesday are preliminary. The system will negotiate with insurers and the board is scheduled to vote on final rates next month.

The CalPERS board approved the new rate-setting methodology last year on the recommendation of its health insurance experts, who said the system needed to make changes to save three of its best plans.

Those plans — Anthem Traditional HMO, Blue Shield Access+ and PERS Care — attract people who spend the most on medical treatment. Insurers kept raising premiums to cover the medical spending, and that was driving healthy people away from the plans, prompting more price hikes.

That pattern, known as a “death spiral,” would have made the plans unsustainable, Health Plan Research and Administration Division Chief Marta Green told the board last year.

The risk adjustment program adopted by the board essentially shifts money from plans with lower health risk to those with higher risk. Under the plan, prices will increase again in 2023 and then begin to stabilize, Green has said.

“You’ll see a leveling off of all of the products,” Green said during a Tuesday board meeting.

On average, prices are projected to increase 5.68% for all the PPO and HMO insurance plans offered to state and local government employees, with prices going up more for PPOs.

The PPO plans formerly known as PERS Select, PERS Choice and PERS Care will be consolidated into two plans. PERS Select will become PERS Gold, and the Choice and Care plans will be combined into PERS Platinum.

The most popular plan by far, a Kaiser HMO covering about 560,000 people, will increase in price by 2.68%, according to projections.

CalPERS’ Medicare plans will go down by an average of a fourth of a percentage point. Medicare HMOs will drop by an average of 6.4% while Medicare PPOs will go up by about 6.2%.

CalPERS’ most broadly available plans for state workers will range in price next year from about $648 per month (PERS Gold) to about $1,205 per month (Anthem HMO Traditional) for a single person under Tuesday’s proposed prices.

For state employees, California pays about $600 per month toward workers’ plans, and offers an additional $260 health insurance stipend to members of SEIU Local 1000.

Employees will be able to switch plans during open enrollment, which runs from Sept. 20 to Oct. 15. New prices take effect in January 2022.

This story was originally published June 16, 2021 at 5:25 AM with the headline "Cheapest CalPERS health insurance plan will cost 23% more next year, projections show."