The California Public Employees' Retirement System plans to raise health care premiums to its members by an average of nearly 10 percent next year, one of the biggest increases in recent years.
The increase of 9.6 percent would be more than twice as big as the rate hike that took effect for this year. It would have significant implications for health care affordability in California and beyond.
CalPERS is a major purchaser of health insurance; it covers nearly 1.3 million public employees, retirees and their family members.
For the average member of CalPERS, the increase would translate into an extra $30 a month in premiums.
The increases were approved Tuesday by CalPERS' pension and health benefits committee and will go to the full governing board today.
"We introduced a number of initiatives over the past three years to help stabilize rates, but today's rates reflect the overall continuing upswing of health care costs," said Priya Mathur, committee chairwoman.
"We tried as much as possible to keep the overall increases close to the national health care cost inflation rate of more than 7 percent projected for next year."
The announcement caught health care experts off guard.
"Wow - that's pretty high," said Joanne Spetz, an expert on health care finance at the University of California, San Francisco.
She said CalPERS has substantial influence on the health care marketplace, and a 9.6 percent increase suggests price inflation is taking off again. CalPERS raised rates just 4.1 percent for this year, less than half as much.
"They tend to push back (on insurers), so if they accepted it, that kind of sets the tone for what the rest of us can expect," Spetz said.
CalPERS said one factor affecting the rate hike was the end of a federal program, called the Early Retiree Reinsurance Program. CalPERs has used more than $200 million in funds from this program to offset premium hikes in past years.
Rates would go up 8.7 percent for HMO plans and 13.9 percent for PPOs. Rates would actually fall an average 10.5 percent for Medicare plans, CalPERS said.
Spetz said the increases seem "a little high, given the recession."
But she added that it's clear rates are going up practically everywhere.
"The hospitals are kind of billing more for each service, and the labor costs are going up," she said.