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CalPERS Approves More Modest Health Insurance Rate Hikes Than Last Year

Average premium increases for CalPERS' 2017 HMO and PPO plans are indicative of health care cost trends. (Ken James/Bloomberg via Getty Images)

The California Public Employees’ Retirement System, one of the biggest health insurance buyers in the country, on Wednesday approved substantially lower premium hikes for its members in 2017 than they saw this year.

CalPERS members will see, on average, a 4.1 percent hike in HMO premiums, a 3.7 percent raise in PPO premiums and a 1 percent increase in premiums for commercially administered Medicare plans.

The increases are moderate compared with the agency’s average premium hikes of 7.2 percent for HMOs and 10.8 percent for PPOs in 2016. CalPERS cited high pharmacy costs as the reason behind last year’s steeper-than-usual increases.

As the largest public purchaser of health benefits in California, and the second largest in the nation, CalPERS’ rates are generally “indicative of where health costs are going,” said Maribeth Shannon, a director at the California Health Care Foundation. (California Healthline, produced by Kaiser Health News, is an editorially independent publication of  the California Health Care Foundation.)

CalPERS covers 1.4 million active and retired state, local government and school employees and their families, the majority of whom are enrolled in HMOs. In 2015, the agency spent more than $8 billion on health coverage for its members.

California Health Care Foundation report released earlier this month shows that premium increases on family coverage offered by employers averaged 4.5 percent in California last year and 4 percent in nationwide.

Shannon said she does not foresee these “moderate” increases continuing in the coming years. As the Affordable Act Care Act gets more people covered and more people seek care, health costs in general will continue to rise, she said. But she doubts insurance premium increases will reach the double digits again any time soon.

Average premiums for employer-based family health insurance coverage in California have risen 216 percent since 2002, compared to a 37 percent increase in overall prices, according to the latest data from the California Health Care Foundation.

CalPERS’ new pharmacy benefits manager, Optum Rx, helped temper next year’s premium increases, said Bill Madison, a spokesman for the agency. Last month, CalPERS announced that OptumRX would administer prescription drug benefits for nearly 486,000 of its members and their dependents. The new contract guarantees CalPERS lower prices on some brand name and generic drugs, Madison said.

While the average rate increases are modest, the proposed hikes vary widely by plan and by region.

The premium on Anthem’s “HMO Traditional,” for example, will rise by 16 percent next year, while the cost of Health Net’s “Salud Y Más” plan will drop by an average of 13.9 percent.

CalPERS also approved a proposal requiring all health plans to implement diabetes prevention programs, in addition to their existing diabetes management efforts, to meet recommendations of the U.S. Centers for Disease Control and Prevention.

California Healthline is an editorially independent publication of the California Health Care Foundation.

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