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CalPERS staff propose 3 regional‑pricing maps to better align public‑agency premiums with county costs; board seeks more analysis
Summary
Staff unveiled county‑level cost modeling and three scenarios (6‑region cost‑based map at 95% alignment, contiguous balanced map at 78%, and 7‑region map at 85%) to improve public‑agency/school premium alignment; staff plans employer outreach and a November recommendation, while board members asked for migration, ZIP‑code, and termination‑window sensitivity analysis.
CalPERS staff told the board they have been reexamining regional pricing for public agencies and school employers because the current three‑region model no longer reflects county cost variation. Yesenia Croft and Justin Willett described a county cost‑of‑care index using three years of claims (2022–2024), adjustments for catastrophic outliers and member risk, and special handling for low‑enrollment counties by analyzing cross‑county medical travel.
Staff excluded Kaiser data from the county cost index (Kaiser is a fully integrated plan with different cost drivers). The county cost index heat map showed the highest cost counties concentrated in what staff labeled Region 1 (Bay Area and Sacramento corridor), with substantial within‑region variation that has made CalPERS premiums more competitive in some high‑cost areas and less competitive elsewhere.
To balance price alignment, member disruption and employer administrative complexity, staff modeled thousands of county groupings and presented three illustrative scenarios: • Scenario A (6 regions, cost‑based, largely noncontiguous): highest alignment to county costs (~95%) but high administrative complexity and more members seeing premium changes (example buckets: ~86,200 members estimated to face up to +5%; ~1,900 members >+15%). • Scenario B (contiguous balanced map): lower alignment (78%) but fewer high‑impact premium increases and medium administrative complexity. • Scenario C (7 regions, split Southern counties into an additional region): improved alignment (85%), contiguous, and lower member disruption than A.
Staff said they will present refined scenarios to the Pension & Health Benefits Committee in September, solicit employer feedback through webinars and leadership dialogues (August–October), and return with a formal recommendation and request for board action in November; any adopted model would take effect Jan. 1, 2028. Staff emphasized tradeoffs: fewer regions reduce administrative burden but increase within‑region cost variance; more regions improve alignment but increase employer complexity.
Board members asked detailed questions about county groupings, member travel patterns for care, ZIP‑code boundary effects, which specific agencies/members would face >15% increases, and the potential for agencies to terminate CalPERS coverage if rates shift significantly. Staff described retention efforts and a 60‑day termination window after board approval for agencies that elect to withdraw for an effective Jan. 1 change. Staff also said they will update maps with 2023–2025 claims data this summer.
Ending note: Staff seeks employer feedback during August webinars and will return with refined scenarios in September before making a November board recommendation; the board requested additional sensitivity analysis (migration/termination modeling and ZIP‑code impacts) ahead of final decisions.
