CalPERS approves 9.6% increase in health premiums in 2013


The California Public Employees’ Retirement System, the third-largest purchaser of health benefits in the country, approved a 9.6% increase in health premiums next year for its nearly 1.3 million members.

The new rate takes effect Jan. 1. The hike represents a sharp rise over the 4.1% increase in premiums this year and topped 2011, when premiums rose 9.1%. CalPERS said the 2013 increase amounts to an additional $30 a month per member.

Some health-policy experts were surprised at the size of the increase given CalPERS’ purchasing power and the slowdown in healthcare spending nationally during a weak economy.

“It’s indicative of the challenge of getting healthcare costs under control,” said Gerald Kominski, director of the UCLA Center for Health Policy Research.

CalPERS spends nearly $7 billion annually on medical care for active and retired state and local government employees and their family members. CalPERS is the largest in California in terms of healthcare spending and it trails only the federal government and General Motors Co. nationally.

“As we negotiate with our health plan partners, our objective continues to be initiatives that will help us improve our members’ health while reducing their healthcare costs,” said Ann Boynton, deputy executive officer for benefits at CalPERS.

The increases for 2013 range from 8.7% for HMO plans to 13.9% for preferred provider plans. Medicare plans will decrease 10.5%.

CalPERS negotiates rates with three of the state’s biggest health plans: Blue Shield of California, Kaiser Permanente and Anthem Blue Cross, a unit of WellPoint Inc.

The pension fund said one reason for higher rates in 2013 was the end of an early retiree reinsurance program in the federal Affordable Care Act. CalPERS said it used more than $200 million in reimbursements from that program to offset premium increases in recent years.

“We tried as much as possible to keep the overall increases close to the national healthcare cost inflation rate of more than 7% projected for next year,” said Priya Mathur, chairwoman of the pension and health benefits committee at CalPERS.

During the recession, the growth of healthcare spending nationwide slowed. National healthcare spending grew less than 4% in 2009 and in 2010, according to government figures, the lowest rates in more than 50 years.

A government estimate released this week echoed that trend, predicting a 3.9% increase in spending for 2011.