Budget Proposal: Mandatory Costs
Health Care Premium Increase, $28,034,000
The California Public Employees’ Retirement System (CalPERS) administers CSU employee health
care benefits. CalPERS offers a selection of health maintenance organization (HMO) and preferred
provider organization (PPO) plans to its enrollees. Health care premiums are shared between the
CSU and employees, with the CSU funding a significant portion of the premium costs. The 2007/08
CSU budget plan includes $28 million to fund the base increase in employer-paid health care costs
resulting from January 2007 premium increases. Health care cost increases are determined by the
number of CSU employee participants and the difference between the old and new employer-paid
The following chart indicates the Government Code (employer-paid) health care
contribution increases from 2003 through 2007:
Government Code Health Care Monthly Employer Contribution Rates
% $ amount
+ 1 dependent
+ 2 or more
The total increase in CSU health care costs due to contribution changes during
this five-year period is approximately $129 million.
|Government Code Health
|5-Year Increase in CSU Health Care Costs:
The CSU is governed by Government Code Section 22871 that defines how employer-paid health care
contribution rates are calculated. Rates are based on the weighted average cost of the four largest
health benefit plans. Either through policy or collective bargaining agreement, the CSU covers health
care costs for represented and nonrepresented employees up to an amount equivalent to the
established Government Code rates, with the exception of Unit 6 (Skilled Crafts), which bargained
CSU employer health contribution rates slightly above Government Code rates.
CalPERS offers CSU employees the choice of three health maintenance organizations (Blue Shield of
California, Kaiser Permanente, and Western Health Advantage), two preferred provider organizations
(PERSCare and PERS Choice), and one association plan (PORAC) for peace officers only.
For 2007, there are some changes to the employee health care monthly deduction amounts,
depending on the health plan and the number of eligible dependents insured under the health plan.
Employee health care contributions will increase up to $22 per month for employees enrolled in the
Blue Shield HMO plan, between $43 and $120 per month for employees enrolled in PERSCare, and
between $5 and $21 per month for employees enrolled in PERS Choice. Employee monthly deductions
for Kaiser Permanente and PORAC will decrease. Overall, 2007 HMO employee health care monthly
deductions range from $0 to $92 per month, whereas the PPO employee health care monthly
deductions range from $12 to $130 for PERS Choice and between $323 and $939 for PERSCare,
depending on the number of eligible dependents insured under the health plan.
The 2007/08 budget request funds permanent base costs related to January 2007 employer health
care premium increases. The CSU plans to absorb approximately $14 million during fiscal year 2006/07
to fund the one-time costs related to the January 2007 premium increases for the six-month period
from January - June 2007.