CalPERS previews 2026 health premiums, flags Monterey and Harmony network changes; pharmacy benefit vendor negotiations continue

CalPERS staff on June 17 presented preliminary 2026 premium projections for basic and Medicare health plans, recommended a change to how one narrow‑network plan is offered in Monterey County and proposed postponing another plan’s expansion to reduce premium volatility. Staff also updated trustees on ongoing negotiations for a new pharmacy benefit manager (PBM) contract intended to include financial guarantees tied to cost trend and clinical quality.

Rob George Zombeck, health plan actuary, said preliminary results show average increases of about 6.5% for basic HMOs and roughly 12% for basic PPOs; the combined CalPERS premium increase was preliminarily 8.21%, an improvement from last year. For Medicare, the weighted average across Medicare Advantage and Medigap products was higher for certain plans, driven in part by changes in CMS subsidy methodology and rising pharmacy costs. George Zombeck and Don Moulds described several drivers: medical and pharmacy trends, plan‑level claims experience, higher utilization of specialty drugs and Inflation Reduction Act changes to Medicare subsidies that have uneven effects across plans.

Two narrow‑network issues drew staff recommendations. First, Blue Shield’s Trio plan has grown and is affected by high costs in Monterey County; staff recommended replacing Trio with Blue Shield’s broader Access+ plan in Monterey to protect Trio’s statewide sustainability and avoid Trio’s premium being driven above comparable Access+ levels. Staff said the change would preserve a low‑cost statewide option but acknowledged some current Trio members in Monterey could see higher premiums; Blue Shield has begun regulatory discussions with the Department of Managed Health Care. Second, UnitedHealthcare’s Harmony narrow‑network plan expanded rapidly, particularly into Northern California counties, producing membership increases that contributed to premium volatility. Staff recommended delaying Harmony’s four‑county Northern California expansion for one year so the plan can stabilize.

Several trustees complimented staff on negotiation outcomes and the work required to moderate premium increases. Public commenters from rural California urged CalPERS to preserve access for members who rely on multi‑state or cross‑border providers — several agencies asked CalPERS to consider extending rural county designations or to allow wider PPO network options for border communities.

On the pharmacy benefit, Julia Logan, CalPERS health team, briefed trustees on negotiations with multiple PBMs following a nationwide market scan and vendor discussions. CalPERS seeks a new five‑year contract that improves affordability, strengthens clinical oversight and increases transparency. Key negotiation goals include a pharmacy cost‑trend guarantee (putting substantial dollars at risk for exceeding agreed trend thresholds), quality guarantees tied to the CalPERS Quality Alignment Measure set and enhanced audit and transparency rights. Staff said the finalists have agreed in principle to clinical guarantees and enhanced contract protections but that several contractual items remain under negotiation; a final PBM recommendation is expected at the July board off‑site. Staff warned members of potential disruption tied to any PBM transition and described mitigation steps, including transition planning, targeted outreach and CMS protections for first fills to Medicare members.

Why this matters: Health premiums are a major cost for members and employers; PBM terms affect pharmacy spending — a significant share of total health costs. Network decisions affect member access, particularly in high cost counties and rural border areas.

What’s next: Staff will continue negotiations with carriers and PBM finalists, finalize premiums and submit final rate recommendations to the board in July, and continue member outreach about any network or PBM changes.