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CalPERS recommends dropping UnitedHealthcare basic plans after steep rate requests and seeks Sutter Health Plan to preserve Sacramento area access
Summary
CalPERS staff recommended removing UnitedHealthcare's Alliance and Harmony basic plans after UHC proposed unsubstantiated, large premium increases; staff proposes adding a Sutter Health Plan service area in six counties to preserve member access to Sutter hospitals and outlined administrative transfer and communications plans. Preliminary program weighted average premium change is 4.98% for 2027.
CalPERS staff recommended removing UnitedHealthcare's two basic plans (Alliance and Harmony) from the CalPERS basic portfolio for 2027 after describing the carriers' final rate submissions as "extremely high and unsubstantiated." Rob Jarzobic told trustees UHC's requested increases would have added roughly $167 million in premiums next year if accepted.
To preserve member access — particularly for members who rely on the Sutter Health system in the greater Sacramento area — staff recommended adding the Sutter Health Plan to CalPERS' basic portfolio in a six‑county service area (Sacramento, San Joaquin, Stanislaus, Solano, Placer and Yolo). Jarzobic said Sutter Health Plan is a fully integrated plan with high NCQA quality ratings and statewide provider capacity in the targeted area. He cautioned that no replacement is a perfect match for UHC Alliance members and that some members (notably about 800 combination basic/Medicare families) may need to select new products because a Sutter‑based Medicare Advantage product is not feasible by Jan. 1, 2027.
Staff described a two‑part administrative transfer strategy for members who do not actively enroll in a new plan during open enrollment: prioritize provider continuity (matching the medical group associated with a member’s primary care physician) and minimize premium impact by assigning members to the lowest‑price plan that preserves access where possible. Jarzobic said staff aims to finalize contract terms with Sutter by the end of June and present a formal recommendation for board approval at the July offsite.
Staff also presented the preliminary 2027 premium outlook: basic plan weighted average roughly 5.8%, Medicare weighted average roughly 0.51%, and an overall program average of about 4.98%. Given an improved PO fund reserve position, staff recommended halving the PO premium surcharge (the 'ser charge') for 2027 with the goal of eliminating it in 2028.
Public commenters from school districts and retiree groups raised concerns about regional pricing that groups rural counties with high‑cost metropolitan areas (for example, Amador County) and asked staff to evaluate regional boundaries to avoid imposing a rural pricing penalty; other commenters urged CalPERS to add guardrails around private‑equity ownership of local health facilities. Staff said they will continue outreach and provide county‑level mappings and employer communications ahead of open enrollment.
