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Are You On A Sinking Ship?

How long do you stay on a sinking ship? It seems like an easy answer, right? As soon as you know the ship is sinking, you bolt for the lifeboat. But, unfortunately, the reality is that we want to think things are not as bad as they seem. So we wait to see what others do first, and while paralyzed in our temporary indecision, we may wait too long so that our options for escape have narrowed or evaporated once we act.

That sums up what may be happening to many public agency employers participating in CalPERS health insurance plans.

Last November, CalPERS approved significant rate hikes for its health plans that young, healthy workers predominately favored. These were less expensive health plans, covering somewhere around 150,000 employees and dependents. The proposed increase (up to 50% on some plans) was an effort to save other CalPERS health plans from "death spirals," where price increases were causing decreased enrollment, which in turn was causing more price increases to those same troubled plans. The troubled plans – PERS Care, Blue Shield Access+, and Anthem Traditional HMO – were richer plans with broader networks covering approximately 200,000 participants. You could say that CalPERS was looking to buoy their first-class sinking ships by burdening their smaller vessels.

On June 15, 2021, the captains at CalPERS were at it again. Preliminary health plan rates for 2022 were announced, and one of CalPERS' least expensive plan, PERS Select PPO, is set to sustain a 23% increase to premiums. This is all part of CalPERS' new rate-setting plan, where they are attempting to stabilize prices over time. Similar rate increases are expected again for 2023 as part of this strategy. The PERS Select PPO currently has approximately 110,000 participants, so once more we see a smaller group being targeted to float the benefits-rich plans.

How long do you stay on a sinking ship?

Yes, that question might be oversimplifying the issue. In reality, no single benefits program works for every organization, let alone every individual. But clearly, many public agencies are participating in CalPERS medical plans because it just seems like the only option.

With a payphone at a Torrance bowling alley serving as the first "office phone," Keenan started as a benefits brokerage and consulting firm by focusing on the needs of a single local school district in the Los Angeles area in 1972. In the following 49 years, Keenan has grown to a firm of more than 750 employees dedicated to providing innovative insurance solutions to the public agencies throughout the state that serve our communities every day. If inefficient benefits programs overburden our clients' budgets, our communities ultimately suffer.

So, what is the condition of the ship that you are on? That is the question that really should be asked first. CalPERS plans might be the right option for your employees and your budget, or there could be better options available through other pooled programs or even stand-alone insurance. Keenan's CalPERS Breakaway Study has helped numerous agencies answer that question. Some of our clients have remained in CalPERS due to the study, while many have realized significant benefits from exiting CalPERS' health insurance program.

California schools and public agencies can find out their best options with a free CalPERS Breakaway Study here.

About Kevin Knopf
Kevin is Keenan's Assistant Vice President of Marketing Communications and assists with authoring and distributing information on insurance industry trends, legislation, and regulatory issues that may have an impact on Keenan's clients.