CalPERS Approves 2024 Health Premiums Increase
July 20, 2023
During an offsite meeting in Monterey July 17-19, the California Public Employees’ Retirement System’s (CalPERS) Board of Administration approved increased health plan premiums (with a 6-5 split vote), beginning in January 2024.
Last year, the CalPERS Board of Administration approved health plan premiums for calendar year 2023 that represented a 6.75 percent increase from the prior year. The adopted 2024 premiums reflect an average increase of 10.8 percent but vary widely by plan with two popular Preferred Provider Organization (PPO) plans increasing substantially more. In an effort to smooth out the cost increases for PPOs, CalPERS considered a range of options that would include a one risk pool phase-in over either two or three years. After lengthy discussion with public comment, CalPERS voted to adopt a three-year transition of basic HMO and PPO plans into a single risk pool beginning in 2024. CalPERS argues that this change will stabilize enrollment across the HMOs and PPOs by pricing the plans based on the value of their benefits and network instead of the mix of healthy or unhealthy members in a plan. This strategy was adopted, disappointingly, despite acknowledgement from board members that the premium increases are high and will financially impact members.
CalPERS attributed the increases for the 2024 premiums to rising medical costs and continued high pharmacy costs, but also notes other factors such as inflation, an additional surcharge, and decreased Federal Medicare Reserves. CalPERS participates in the Rate Development Process each year, during which the Board considers new health plans, expansions of existing health plans, and benefit design changes. Health carriers submitted their initial premiums to CalPERS earlier this year and met with the CalPERS rates team to discuss data, assumptions, and models used to calculate the proposed premiums.
The 2024 premiums adopted this week will go into effect January 1, 2024. While employees and employers will see increased premiums on average, the actual increase or decrease will vary based on plans. For example, for the adopted 2024 basic plan premiums, the percent change from 2023 varies along a spectrum of a 2.4 percent increase (Anthem Blue Cross Select HMO) to a 13.6 percent increase (Kaiser Permanente Out of State). Notably, all Kaiser plans included the most significant premium increases, and Kaiser accounts for approximately half of all basic CalPERS members. Medicare plan premiums will also increase in 2024, on average by 9.6 percent overall.
The impact on counties and other agencies that contract with CalPERS for health plans will be determined by the negotiated health premium contribution amount of each agency. More information regarding the increased premiums, the CalPERS meeting agenda, and associated meeting materials, are available on the CalPERS website.