CalPERS 2004 Health Coverage Price Hike Proposed at 18.4%

June 17, 2003 ( - A draft contract with the HMO networks that provide health insurance coverage to the 1.2 million members of the California Public Employees' Retirement System (CalPERS) calls for an 18.4% 2004 price hike.

CalPERS – one of the nation’s largest health insurance buyers – reached the proposed contract terms with three not-for-profit HMO plans: Blue Shield of California, Kaiser Permanente and Western Health Advantage, according to a Reuters news report.

With $138 billion in assets, CalPERS, the nation’s large public pension fund, is often seen as a bellwether for health insurance trends. Other US employers, who have also struggled with soaring health-care costs over the past few years, watch its annual contract negotiations closely.

However one recent report suggested that the giant pension fund’s experiences might not be as illustrative of developing national trends as once thought. Kaiser Permanente and Blue Shield of California, which combined insure about two-thirds of CalPERS’ members, said in the recent study that CalPERS members use more care and cost more per visit than the typical HMO patient. This may be due in large part to the average CalPERS Kaiser participant being 6% older than other participants and Blue Shield participant being 8% older (See CalPERS HMO Rates Overly Influenced By Age).

Nationally representative or not, though, the proposed increases would be less than the 25%-rate hike that CalPERS approved for 2003 and below the initial bids that had pointed to a 31% insurance rate hike for next year. The increase in the amount employees had to contribute in 2003 added an average of $52 more per month for current and retired California state employees.

CalPERS’ health benefits committee will consider the recommended contract on Tuesday before making its own proposal to the 13-member CalPERS board for final approval. The total health benefits package will cost $3.95 billion, up from $3.34 billion in the current year, CalPERS said. The HMO package covers about 70% of CalPERS’ health benefits costs, the pension fund said.

Under the staff recommendation by CalPERS staff, Blue Shield rates would rise 18.44%, Kaiser’s 18.16% and Western Health’s 34.5%.