CalPERS Board OKs Raise in HMO Premiums

The board of the California Public Employees’ Retirement System, as expected, approved a 9.2% increase in the cost of premiums next year for HMO plans offered to its 1.2 million members. But the board left open the possibility of revisiting a controversial proposal to raise co-payments for prescription drugs before the new rates go into effect Jan. 1. CalPERS’ action also included a 20% increase for its less-restrictive health plans known as preferred provider organizations, or PPOs. CalPERS’ actions on health-care costs are closely watched by businesses and other purchasers of health insurance. As the nation’s second-largest buyer of health care, behind the federal government, CalPERS usually sets the pace for how much health insurers will raise rates. Indeed, industry analysts and others told the Center for Studying Health System Change that U.S. health plans likely will raise average premiums nationwide 10% next year, driven by rising drug costs, a tight labor market and demand for more patient services. That compares with a 7% increase last year.