CalPERS scores coup with health costs well below average

Amid double-digit boosts in health insurance costs, California's largest buyer of employee health benefits scored a coup.

CalPERS, which covers nearly 1.3 million active and retired state and local government employees and their families, in June approved a 3.2 percent increase in premiums for 2010 - its lowest increase in 14 years.

"This is good news for our members who are facing furloughs, pay cuts and difficult economic times," Rob Feckner, CalPERS board president, said in a statement.

Premiums are rising 10 percent or more for many California health care plans, with employees often absorbing the added costs or getting coverage with large deductibles.

CalPERS' 3.2 percent overall increase is for premiums starting Jan. 1.

"That's well below trend," said David Hodges, a Santa Rosa health insurance broker. CalPERS is an "experience rated" system that bases premiums on its level of claims payments.

"Size matters in health insurance," Hodges said, noting that CalPERS can spread major claims over a vast pool of subscribers.

This year, premiums went up 4.8 percent. In the past seven years, the CalPERS plans have averaged a 12.5 percent annual increase and gone up as much as 24 percent in a year.

CalPERS attributed the small premium boost for 2010 to hardball negotiations with health plan providers, reduced use of health care by members and increased use of generic drugs.

CalPERS, which will spend more than $5.7 billion on health care plans this year, is second only to the federal government as a buyer of public employee health benefits.