2008/09 Support Budget

Budget Proposal: Mandatory Costs

Health Care Premium Increase, $21.8 Million

Student in a computer labThe 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 its employees, with the CSU funding a significant portion of the costs. The 2008/09 CSU budget plan includes $21.75 million to fund the base increase in employer-paid health care costs resulting from January 2008 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 2004 through 2008:

Eligible Dependents 2004 2005 2006 2007 2008 Five-Year % Increase $ amount
Employee Only $331 $362 $394 $439 $471 42.3% $140
Employee + 1 dependent $621 $679 $738 $823 $886 42.7% $265
Employee + 2 or more $780 $858 $933 $1,042 $1,129 44.7% $349

The total increase in CSU health care costs due to contribution changes during this five-year period is nearly $114 million.

Calendar Year
(Contract Period)
Government Code Health
(Employer-Paid)
CSU Annualized Health Care
(Budget Estimates)
2004 16.2% $25,980,000
2005 9.7% $19,500,000
2006 8.7% $18,709,000
2007 11.6% $28,034,000
2008 7.9% $21,755,000
5-Year Increase in CSU Health Care Costs: $113,978,000

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), three preferred provider organizations (PERSCare, PERS Choice, and PERS Select), and one association plan (PORAC) for peace officers only.

For 2008, 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 $26 per month for the Blue Shield HMO, $3 per month for Kaiser, and $31 per month for PORAC. Monthly deductions will decrease for employees enrolled in PERSCare and PERS Choice, with PERS Select newly introduced. Overall, 2008 HMO employee health care monthly deductions range from $0 to $118 per month, whereas the PPO employee health care monthly deductions range from $7 to $113 for PERS Choice, $271 to $801 for PERSCare, and $0 to $74 for PERS Select, depending on the number of eligible dependents insured under the health plan.

The 2008/09 budget request funds permanent base costs related to January 2008 employer health care premium increases. The CSU plans to absorb approximately $11 million during fiscal year 2007/08 to fund the one-time costs related to the January 2008 premium increases for the six-month period from January-June 2008.

 


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Last Updated: November 13, 2007