DATE: AUGUST 1, 2023
DEPARTMENT: HUMAN RESOURCES DEPARTMENT
FROM: MARINA HORTA-GALLEGOS, HUMAN RESOURCES DIRECTOR
TITLE: SALINAS PLAN – HEALTH CARE COST CONTAINMENT
RECOMMENDED MOTION:
No motion is required for this item. Comments and feedback from the Finance Committee on the ongoing implementation of this Salinas Plan initiative is requested.
DISCUSSION:
The Salinas Plan has 32 recommendations, four of which are categorized as “Workforce” strategies. Healthcare Cost Containment is one of four workforce recommendations that aims at achieving flat healthcare cost growth while still maintaining competitive benefits in the labor market. The Salinas Plan recommends an approach to health care cost containment that involves creativity and collaboration between the City and employee units to achieve sharing in benefits funding and promoting increased costs awareness. Consistent with this recommendation, over the past couple years, the City negotiated modest employee contributions with all employee units.
The City contracts with the California Public Employees’ Retirement System (CalPERS) for health care benefits. Health plan availability, covered benefits, premiums, and co-payments are determined by CalPERS, not the City. In 2021, CalPERS transitioned from three Preferred Provider Organization (PPO) plans in our region to two PPO plans by combining PERS Care and PERS Choice into PERS Platinum and the PERS Select plan into PERS Gold.
Historically, health care costs have been one of the primary cost drivers of the general funds budget with an expected cost of approximately $14.0M in FY 23-24, inclusive of the increase in premiums. Currently, the City pays 95% of the premium for the level and type of coverage selected by an employee, up to the CalPERS Platinum plan premium with some minor variations. Approximately 43% of the City’s workforce is covered under the PPO plans and a majority of the public safety members, approximately 42% of the City’s workforce, are in the Peace Officers Research Association of California (PORAC) plan with 15% of the workforce in various other plans.
On July 18, 2023, the CalPERS Board of Administration approved the rates for calendar year 2024, attached. The final rates provide an overall increase of 10.95% including a 9.51% increase in the Platinum Plan and 10.81% increase in the Gold Plan. PORAC plan premiums (36% of participants) will increase by 12.85%. CalPERS attributes the increase in rates to medical inflation which includes a rising demand for non-COVID related services, high labor costs, and a desire to recoup pandemic-era losses. The Basic program which includes Kaiser Permanente and PPO plans experienced the highest increases. With half of CalPERS members in the Basic program enrolled in Kaiser, CalPERS is encouraging plan members to shop its portfolio which includes many more affordable plans.
The CalPERS Board of Administration also adopted a new risk-pooling policy that will combine risk-pools for the different health plans over a three-year period. It is anticipated that this will increase Health Maintenance Organization (HMO) rates to keep PPO health plan premiums from “skyrocketing.” FISCAL AND SUSTAINABILITY IMPACT:
The City budgeted the increase in premiums at 8% for the entire year and does not anticipate impacts to the budget as a result of the new rates for calendar year 2024.
ATTACHMENTS:
2024 Regional Health Premiums for Public Agencies (PPO Plans) 2024 Regional Health Premiums for Public Agencies (HMO Plans) 2024 Association Health Plan Premiums (PORAC)
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CITY OF SALINASFinance CommitteeCITY OF SALINASFinance Committee
CITY OF SALINAS
Finance Committee
CITY OF SALINAS
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