Health Benefits

How We’ve Improved Health Rate Negotiations for Members

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CalPERS has improved how we set health premiums.

Although we don’t yet know all the ways in which COVID-19 may impact health rates, we do know it is causing delays in our typical timing while we try to better understand the financial implications of the pandemic. Health premiums for 2021 will now be approved in July.

This year, CalPERS made significant and dramatic changes to improve the annual rate development process with our health plans. These changes have enhanced transparency and greatly improved our negotiating position. For the first time, we are using our own claims and financial data to create baseline projections for each health plan, and we will use these projections to review each health plan’s rate proposal.

Historically, each health plan used its own methodology to project rates. This made it difficult for CalPERS to validate and negotiate from a position of strength on behalf of our members and the employers that contract with us for health benefits.

Our New Approach to Setting Rates

This year, CalPERS is using our own claims and financial data to create baseline projections for each plan. We’re using these projections to review each health plan’s rate filing, and we are requiring the health plans to separate data into specific trend categories so we can compare them to our projections and assumptions.

This standardized methodology allows CalPERS to drill into significantly more detail to understand what’s driving the claims trend at each plan. The trend data includes increased utilization, increases in unit costs, demographic shifts among members, and/or geographic shifts. This transforms our rate development process into more of a data reconciliation comparison, as opposed to a negotiating process.

We believe this new approach will ultimately lead to better rate outcomes for our members and employers. The results of these efforts will go into effect with the 2021 health plan rates.

Health Rates to Be Approved in July

We will present the preliminary premiums at the June Pension and Health Benefits Committee meeting. The board will approve final rates at the July offsite. This ensures we have the most up-to-date information available for the cost pressures in 2020 and 2021.

This timing will allow us to set the most accurate pricing for the 2021 plan year, while minimizing the impact to our typical Open Enrollment time frame, and ensures that our members, stakeholders, and the public have time to digest and comment on the proposed rates.

CalPERS’ 2020 Open Enrollment will take place from September 21 through October 16.

Update: This article was edited for clarity on May 27, 2020.