DATE: SEPTEMBER 1, 2026
DEPARTMENT: HUMAN RESOURCES
FROM: MARINA HORTA-GALLEGOS, HUMAN RESOURCES DIRECTOR BY: PATRICIA PEÑALOZA, HUMAN RESOURCES MANAGER
TITLE: HEALTH CARE COST CONTAINMENT
RECOMMENDED MOTION:
No motion is required for this item.
EXECUTIVE SUMMARY:
This report provides an update on the 2027 CalPERS health premium rates. The purpose of the report is to inform the Finance Committee about changes in healthcare costs and their potential impact on the City’s budget and employee benefits.
BACKGROUND:
Over the last several years the City has looked at healthcare cost containment by phasing in modest employee cost sharing.
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.
Historically, health care costs have been one of the primary cost drivers of the general fund budget with an expected cost of approximately $16.8M in FY 26-27, inclusive of the increase in premiums. This represents an increase of $2.8M over the past 3 years. Currently, the City pays 95% of the premium for the level and type of coverage selected by an employee, up to 90% of the CalPERS Platinum plan premium with variations by unit. Approximately 38% (233) of the City’s workforce is covered under the PPO plans, 22% (133) under the HMO plans, and a majority of the public safety members, approximately 34% (208) of the City’s workforce, are in the Peace Officers Research Association of California (PORAC) plan with 6% (39) of the workforce declining coverage.
On July 14, 2026, the CalPERS Board of Administration approved the health premium rates for calendar year 2027. The newly established rates reflect notable changes compared to the previous year, impacting both PPO and HMO plans offered to City employees.
PPO Plan Rates
The final basic PPO rates for 2027 show an overall increase of 7.34%, which is a decrease from last year’s increase of 12.08%. Within the PPO offerings in Monterey County, the Platinum plan will experience a 6.5% increase in premiums, down from a 13.15% increase in the previous year. The Gold plan premiums will increase by 8.44%, also lower than last year’s 10.54% increase.
HMO Plan Rates
Basic HMO rates have an overall increase of 4.49%, which is down from the 6.48% increase seen last year due to higher pharmacy spending and increased provider reimbursement demands. Specific changes within the HMO plans in Monterey County include a 1.61% increase for the Kaiser Permanente plan, a reduction from last year’s 5.03% increase. Conversely, the Anthem Blue Cross Select plan will see an 11.24% increase in premiums, up from 6.34% the previous year.
PORAC Plan Rates
The Peace Officers Research Association of California (PORAC) plan premiums in Monterey County will increase by 3.01% in 2027, a significant decrease compared to the 9.03% increase in the previous year.
CalPERS approved modifications to the benefits and health plans available to City employees. Among these changes, UnitedHealthcare’s Signature Value Alliance and Harmony Basic plans will be removed from the list of plans due to unsubstantiated premium increases ranging between 21-23% and a new contract with Sutter Health plan will become effective January 1, 2027. CalPERS began sending information to impacted members and will continue to do so through October. These updates are not expected to cause any disruption for members, as no City employees are currently enrolled in the UnitedHealthcare plans scheduled for removal.
Effective July 1, 2027, all Basic health plans will provide coverage for both the diagnosis and treatment of infertility. This enhancement applies to CalPERS Basic HMO plans, which are required to add these benefits under Senate Bill 729. The CalPERS Board has approved extending these infertility benefits to Basic PPO plans. By implementing these changes, CalPERS aims to provide consistent benefits to all members and mitigate the likelihood of employees switching between health plans to obtain desired infertility coverage. Avoiding such changes is important, as shifts in enrollment can potentially affect the rates associated with different plans.
CVS Caremark will continue providing pharmacy benefits coverage to members for most plans, including Anthem Blue Cross Select, PERS Gold, and PERS Platinum who receive health care benefits through CalPERS.
CEQA CONSIDERATION:
Not a Project. The City of Salinas has determined that the proposed action is not a project as defined by the California Environmental Quality Act (CEQA) (CEQA Guidelines Section 15378).
CALIFORNIA GOVERNMENT CODE §84308 APPLIES:
No.
STRATEGIC PLAN INITIATIVE:
This item supports the City Council 2025 Strategic Goal of City Services, ensuring fiscal responsibility and financial management.
DEPARTMENTAL COORDINATION:
The Human Resources Department will continue collaborating with the Finance department in this effort to ensure the item is appropriately budgeted for.
FISCAL AND SUSTAINABILITY IMPACT:
The City budgeted the increase in premiums at 12% for the entire year and will not see impacts on the budget as a result of the new rates for calendar year 2027.
ATTACHMENTS:
1. 2027 Regional Health Premiums
2. 2027 Association Plan Health Premiums
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CITY OF SALINAS
FINANCE COMMITTEE STAFF REPORT