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June 17, 2003
CalPERS to Propose 18% Hike in Health-Care Insurance Premiums
Although the increase for 2004 would outpace inflation, the pension fund sees slowing trend.
By Debora Vrana and Don Lee, Times Staff Writers
In a sign that the rate of health-care inflation may be slowing, the California Public Employees' Retirement System is proposing an 18% increase in medical insurance premiums next year for most of its 1.2 million members.
Last year, CalPERS approved a 25% hike in HMO premiums, a boost that highlighted the nation's dramatic run-up in health-care costs and the financial strains that it put on many families. An 18% increase would far outpace the rate of inflation overall, but executives at the Sacramento-based pension fund said it would mark a significant turn of events.
The proposal will be unveiled at a public meeting today in Sacramento.
CalPERS is one of the nation's biggest purchasers of health care, and the insurance rates it negotiates for its members are widely seen as a bellwether for what private industry will be facing in the coming year.
Like other government entities and businesses, CalPERS has struggled in recent years to hold down health-care costs amid rapidly rising prices for hospital services and prescription drugs.
"The trends are coming down," said Clark McKinley, a CalPERS spokesman, noting that the use of both hospital services and drugs is coming down. "We're seeing some improvement."
Of the 18% figure, he said: "It's not as bad as we had feared but not as good as we had hoped."
CalPERS staff arrived at that rate of premium increase after months of negotiating with its two principal HMO health plans-Blue Shield of California and Kaiser Permanente. McKinley said the two carriers, which combined cover more than 880,000 CalPERS members, had originally sought a rate increase of 31% for 2004.
The CalPERS staff proposal will be taken up today by the pension fund's nine-member health committee at a public session, and the full board is expected to vote on the recommendation Wednesday.
The proposal for next year would make no changes in the co-payment that CalPERS members would pay for doctors' office visits and prescription drugs. However, some members probably would see hefty increases in their share of premium costs. Details of the increases were not available Monday.
CalPERS also offers a self-funded, preferred provider organization health plan, which generally gives members more flexibility in choosing doctors, although at a higher cost. CalPERS' PPO rates are expected to increase about 20% in 2004.
CalPERS' big rate increases this year and the 18% that is likely for next year are seen as catch-up for the mid-1990s, when CalPERS was able to keep costs down with its large bargaining muscle and as HMOs cut rates to keep the lucrative CalPERS contract.
Now, with so many of CalPERS' members becoming older and more costly to cover, the pension fund has been powerless in the face of huge medical cost increases.
Public agencies across the state have 60 days to decide whether to go with CalPERS' rate increases or try to obtain health-care benefits on their own.