CalPERS OKs Higher Health Fees

The California Public Employees’ Retirement System on Wednesday approved an 8.7% increase in medical insurance premiums next year -- the smallest rise since 1999 without major changes to co-pays for office visits or prescription drugs.

“We have been able to slow down the escalator,” said George Diehr, health benefits committee chairman at CalPERS.

“Yet we find even these relatively low rate increases unacceptable.”

CalPERS, the nation’s third-largest buyer of employee healthcare, provides benefits for 1.2 million state workers, their dependents and retirees.

Like many employers, families and insurance companies, CalPERS has struggled in recent years with rapidly rising prices for hospital services and prescription drugs. The insurance rates that CalPERS negotiates for its members are widely seen as a bellwether for what private industry will be facing in the coming year.

“The trends are coming down, but it is hardly news to celebrate,” said Peter Lee, president of the San Francisco-based Pacific Business Group on Health, an alliance of employers that buys health insurance for its members.

CalPERS said the new rates, which take effect Jan. 1, reflected projected savings of as much as $45 million in 2006 from use of a new hospital network for Blue Shield members of CalPERS.

The package includes overall rate increases of 8.7% for HMO basic plans and a 9.5% increase for the system’s preferred provider organizations, or PPOs.

At Kaiser Permanente, which covers about one-third of CalPERS members, rates would rise 8.7% for state basic plan enrollees and decrease 10.1% for those with Medicare coverage.