2009/10 Support Budget II

Uses of Revenue

2009/10 Health Care Premium Increase, $8.48 Milion

Milion 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 its employees, with the CSU funding a significant portion of the costs. The 2009/10 CSU budget plan includes $8.48 million to fund the base increase in employer-paid health care costs resulting from January 2009 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 2005 through 2009:

Government Code Health Care Monthly Employer Contribution Rates

2005 2006 2007 2008 2009 Five-Year Increase
% $ Amount
$362 $394 $439 $471 $478 32.0% $116
+ 1 dependent
$679 $738 $823 $886 $909 33.9% $230
+ 2 or more
$858 $933 $1,042 $1,129 $1,167 36.0% $309

The CSU is governed by Government Code Section 22871 that defines the way 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 non-represented 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.

The total increase in CSU health care costs due to contribution changes during this five-year period is nearly $96.5 million.

5-Year Increase in Health Care Costs

Calendar Year
(Contract Period)
Government Code Health
(Employer-Paid Budget Increase)
CSU Annualized
Health Care
(Budget Increase)
2005 9.7% $19,500,000
2006 8.7% 18,709,000
2007 11.6% 28,034,000
2008 7.9% 21,755,000
2009 2.7% 8,484,000
5-Year Increase in CSU Health Care Costs $96,482,000

CalPERS offers CSU employees the choice of two health maintenance organizations (Blue Shield of California and Kaiser Permanente), three preferred provider organizations (PERSCare, PERS Choice, and PERS Select), and one association plan (PORAC) available only to peace officers.

For 2009, there are some changes to the employee health care monthly deduction amounts dependant on the health plan and the number of eligible dependents insured under the plan. Employee health care contributions will increase up to $28 per month for the Blue Shield HMO, $55 per month for Kaiser, and $6 per month for PORAC. Monthly deductions will decrease for employees enrolled in PERSCare, PERS Choice, and PERS Select. Overall, 2009 HMO employee health care monthly deductions range from $0 to $146 per month, whereas the PPO employee health care monthly deductions range from $0 to $75 for PERS Choice and $264 to $763 for PERSCare.

The 2009/10 budget request funds permanent base budget costs associated with January 2009 employer health care premium increases. The CSU plans to absorb approximately $4.24 million during fiscal year 2008/09 to fund the one-time costs related to the January 2009 premium increases for the six-month period from January-June 2009.