2007/08 Support Budget

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 contribution rates.

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

Eligible
Dependents
2003 2004 2005 2006 2007 Five-Year Increase
% $ amount
Employee
Only
$288 $331 $362 $394 $439 52.4% $151
Employee
+ 1 dependent
$537 $621 $679 $738 $823 53.3% $286
Employee
+ 2 or more
$665 $780 $858 $933 $1,042 56.7% $377

The total increase in CSU health care costs due to contribution changes during this five-year period is approximately $129 million.

Calendar Year
(Contract Period)
Government Code Health
(Employer-Paid)
CSU Annualized
Health Care
(Budget Estimates)
2003 29.3% $37,100,000
2004 16.2% $25,980,000
2005 9.7% $19,500,000
2006 8.7% $18,709,000
2007 11.6% $28,034,000
5-Year Increase in CSU Health Care Costs: $129,323,000

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.


Content Contact:
Budget Development
Chris Canfield
(562) 951-4560
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Last Updated: January 26, 2007