CalPERS staff is urging the pension giant to cut UnitedHealthcare’s basic HMO plans starting in 2027 after the insurer came in with steep proposed rate hikes, and is pitching the Sutter Health Plan as the replacement to keep member disruption in check. If the CalPERS board signs off next month, the shakeup could hit tens of thousands of state workers and retirees.
CalPERS staff recommendation
At a Tuesday committee briefing, staff recommended dropping UnitedHealthcare’s Alliance and Harmony basic plans after negotiations failed to pull down proposed 2027 premiums that staff estimated would tack on roughly $167 million in added costs, as reported by The Sacramento Bee. A UnitedHealthcare representative declined to comment, while a Sutter Health spokesperson said the plan is aware of CalPERS’ proposal and noted that any move would still depend on a board vote.
What CalPERS officials said
Rob Jarzombek, chief of CalPERS’ Health Plan Research and Administration Division, told trustees that UHC’s basic plans came in with extremely high and unsubstantiated rate increases for 2027, according to the YouTube recording of the Pension & Health Benefits Committee meeting. He said staff saw UnitedHealthcare as unwilling to meaningfully lower its proposals and argued Sutter was the best alternative because it would cause the least disruption for members.
What this would mean for members
UnitedHealthcare’s Alliance plan is one of CalPERS’ most popular mid-priced options, and The Sacramento Bee reported it covers more than 80,000 CalPERS members. CalPERS’ Jan. 1, 2024 enrollment report puts Alliance enrollment at about 75,955 covered lives, underscoring how many people could be swept into a transition. Staff told trustees Sutter was selected in part because many current UnitedHealthcare enrollees already receive care in the Sutter system.
Premiums and the timeline
CalPERS staff also unveiled preliminary 2027 premium projections, describing they as a modest improvement over last year. The Pension & Health Benefits Committee reviewed those figures in June, and the full board is scheduled to adopt final premiums in July ahead of fall Open Enrollment, according to CalPERS. That timing means any decision to remove UnitedHealthcare’s basic plans would be locked in for the 2027 plan year.
Board member Yvonne Walker told the committee she backs the staff recommendation, saying, per The Sacramento Bee, "It is absolutely right to drop UHC and go to Sutter." CalPERS has framed the proposed switch as part of its role as an active purchaser trying to shield members and public employers from what it views as unjustified rate spikes, with trustees set to make the final call in July.
