California state worker and retiree health insurance prices are going up 4.4% on average next year, according to preliminary rates CalPERS published Tuesday.

A new approach to negotiations with insurers combined with medical spending trends helped keep the increases relatively low, Marta Green, the system’s chief of health plan research and administration, told CalPERS’ Pension and Health Benefits Committee.

“We believe the overall change in preliminary 2021 premiums, especially considering the uncertainty created by the pandemic, is modest,” Green told the committee.

The 2021 prices still could change before next month, when final rates are due, but Green said she didn’t expect to see significant changes.

Prices for CalPERS’ 10 HMO plans are going up an average of 4.57%, according to a price chart CalPERS posted to its website. Its most popular HMO, from Kaiser Permanente, will increase in price by 4.32%, according to the chart.

The system’s PPO plans are increasing in price by 8.54%, according to the chart. The most popular PPO, called PERS Choice, will increase 9.92%

The system’s Medicare plans are set to decrease by an average of 2.53% across the board.

Last year, preliminary rates showed plans would increase an average of 7.2%. The board asked the health insurance specialists to do better, and the final rate increases for 2020 dropped to 4.65% on average.

For the 2021 rates, the health insurance team developed its own estimates for how much prices should increase based on a range of factors including how much medical treatment people in each plan received and health risk changes, Green said. They then compared their projections to those the insurers submitted.

“This puts CalPERS in a much stronger negotiating position,” she told the board.

The coronavirus is affecting prices in a range of ways, she said. Insurers had to pay less than normal to hospitals and doctors in the early part of this year since elective procedures were way down.

But many of those procedures are expected to be rescheduled for the year ahead. Insurers said they built those predictions into price increase requests, Green said.

CalPERS structures its contracts with insurers for its PPO plans in a way that lets the system share in the savings from reduced medical spending. CalPERS has been building up reserves for some plans as a result. The system is planning to use those reserves in several cases to keep price increases low for 2021, Green said.

California pays a large portion of most of its workers’ monthly health insurance premiums.

The state pays a flat dollar amount equal to 80% of the weighted average for its four largest non-Medicare plans for most workers. The state also contributes that average toward family members’ premiums.

The state pays workers represented by SEIU Local 1000 and enrolled in a CalPERS health plan an extra $260 per month under a union contract that runs through June 2023.

For retirees, the state’s contribution depends on hiring date. For some, it pays 100% for retirees and 90% for spouses; for more recent hires it pays 80% toward both.

In a recent tentative contract agreement with the California Correctional Peace Officers Association, the state agreed to cover a projected increase of .54% for the workers next year.

This story was originally published June 17, 2020 at 6:00 AM with the headline "CalPERS health insurance prices to notch upward next year for state workers."