Prices for CalPERS’ most popular health insurance plans are going up more in Sacramento County than in most of the state, partly as a result of a change the retirement fund’s board made to how it groups insurance markets last year.
Employees of schools and local agencies who are enrolled in CalPERS’ most popular plan, a Kaiser Permanente HMO, face a 12 percent premium increase in the Sacramento area, according to published rates. The same plan is going up a tenth of a percent in the Bay Area. In the rest of Northern California it is dropping in price by 2 percent.
The second most popular CalPERS plan, the PERS Choice PPO, is going up 8 percent in Sacramento while decreasing by nearly a percentage point in the the Bay Area and Northern California.
The rate increases take effect Jan. 1. This year’s open enrollment period, during which policyholders may switch plans, started Sept. 9 and runs through Oct. 4.
CalPERS board members were told last year that Sacramento County would face some of the biggest negative impacts under a proposal to combine 43 Northern California counties into one big insurance pool.
While Sacramento County would face “disruption,” the change would stabilize premiums and make CalPERS health insurance more marketable to schools and local governments across the state, and would reduce premiums for more people than it would increase them for, according to board materials.
The board approved the change in December.
Agencies that buy insurance from CalPERS were warned about increases, but when final 2020 rates were approved in June, some public administrators in the Sacramento area were surprised by the numbers.
Monthly premiums for the popular Kaiser HMO will rise to $1,998 per month for a family plan.
“That equates to $209 per month (more) for our Kaiser employees — employees enrolled in Kaiser,” Stacey Peterson, the human resources director for the City of Roseville, told the CalPERS board in June, according to a meeting transcript.
“And, for me, that’s where we have significant concerns, because as an employer, we’re not able to keep up with those rate increases in what we contribute,” Peterson said. “So employees are going to bear the extent of that increase at the family level.”
Premiums for the popular PERS Choice PPO reached $2,239 for a Sacramento County family plan after the 8 percent increase.
A Blue Shield Access + HMO plan, the system’s third most popular, increased 28 percent, reaching $2,932 per month for a family plan, according to pricing tables.
At the same time, premiums for an Anthem HMO Select plan went down 9 percent for Sacramento County, reaching $2,259 for a family. A UnitedHealthcare plan went down 3 percent, reaching $2,339, according to the rates.
The regional changes don’t apply to state workers, whose insurance is managed separately from the local agency and school plans, nor do they affect Medicare plans that are commonly used by retirees.
Greatest good for the greatest number
Health specialists on CalPERS’ staff proposed the change to rating regions as a way to align insurance prices more closely with health care costs and to stabilize premiums.
Health insurance premiums change from year to year based partly on changes in medical spending: When insurers have to spend more on treatment in a given year, they often raise premiums the following year. The impacts to premiums of increased medical spending are spread among all policyholders in an insurance pool.
Other factors also influence premiums, such as insurer competition and the availability of doctors and hospitals in a given region.
Before this year, CalPERS had five regional insurance pools for public agencies and school districts. Over more than a decade, as medical spending rose in parts of each region , the premium increases were spread across the entire regions. For some schools and agencies, the disjuncture created conditions where another insurer could come in and offer lower premiums than CalPERS, according to board materials.
CalPERS staff said improving alignment between spending and premiums could help it market the plans more easily. And by collapsing the five regions into just three — one covering all of Northern California and two splitting up Southern California — CalPERS could spread price risks over more people, making prices more stable.
Of the 42 counties grouped with Sacramento County under the new regional model, 28 have higher relative medical costs than Sacramento County, according to an analysis presented to the CalPERS board.
CalPERS projections showed that, of the roughly 39,000 people covered in the Sacramento area, about 32,000 would face increases of 5 percent to 10 percent under the change. Board members weighed those increases against projected premium drops of more than 3 percent for about 173,000 people around the state.
Premiums likely still would have increased for Sacramento County plans without the changes to regions, but it is not clear by how much. Part of Sacramento County’s increases could be due to increasing treatment costs locally and other factors.
“We don’t speculate how rates would have been different had the regions not changed,” CalPERS spokeswoman Deborah Reyman said in an email. “Regions are designed to reflect the cost of care by area.”
While prices are fluctuating, benefits and plan designs largely are staying the same, according to CalPERS news releases.
Workers who are considering changing plans should check to see whether their doctors are in other networks, and some CalPERS plans pay different amounts for drugs. Premiums are declining in the Sacramento area for HMOs from Anthem and UnitedHealthcare.
In the Sacramento area, Anthem and UnitedHealthcare plans include Sutter hospitals; others don’t.
Policyholders can use an app to compare plans and benefits. The app is available at mobile.my.calpers.ca.gov.