calpers

The California Public Employees’ Retirement System spends $8 billion annually on healthcare for 1.4 million employees, retirees and dependents.

By Chad Terhune
June 18, 2015

  • CalPERS: HMO rates are rising 7.2% for 2016; PPO premiums are up 10.8%
  • CalPERS pins higher premium increases on rising drug costs, including hepatitis C drug Sovaldi

Citing higher drug prices, the California Public Employees’ Retirement System said its HMO premiums are rising by 7.2% next year.

Rates for PPO, or preferred provider organization, plans are going up even more at 10.8%, on average, for 2016.

This marks a departure from two years of more modest increases of about 3% at the giant pension fund.

The agency’s rate hikes are a key barometer since it’s one of the largest healthcare buyers nationwide after the federal government. CalPERS spends $8 billion annually on medical care for 1.4 million active and retired state and local government employees and their family members.

The higher costs might be further evidence of an acceleration in U.S. medical spending after a historic slowdown in recent years. Experts see spending ramping up as the economy strengthens and more people obtain coverage under the Affordable Care Act.

The CalPERS Board of Administration gave final approval to the 2016 rates Wednesday, and they take effect for various plans Jan. 1.

About two-thirds of CalPERS members are enrolled in an HMO. Actual rates will vary by health plan and region.

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