Faced with paying up to 24 percent more for health insurance and losing HMO coverage at four area hospitals, some local governments in the Sacramento region have done what once was unthinkable by dropping out of the CalPERS health program.
The city of Folsom, Sacramento Regional Transit District, Placer Superior Court, and Cooperative Personnel Services are among 17 cities, counties, schools and special districts statewide that have terminated coverage with the California Public Employees' Retirement System for next year, according to figures released Tuesday by the pension fund.
These groups had a total of 8,324 members enrolled in coverage through CalPERS.
Though relatively few agencies left, frustrated local officials say the ranks of departing governments could swell if CalPERS remains on course with its current approach to combat rising health costs.
"We went into CalPERS because there was a choice of affordable HMOs at a very affordable cost.
Now our choices are gone, and our costs have gone up astronomically," said Joanne Narloch, human resources manager with the city of Lodi.
The city is one of dozens of governments around the state that seriously considered leaving CalPERS but didn't follow through by the Monday's deadline to withdraw.
The mounting discontent among the cities, counties and schools insured by CalPERS could signal trouble ahead for the 1.2 million-member pension fund because it needs to retain the local governments that make up 40 percent of its membership if it wants to keep getting price concessions based on its size.
Jarvio Grevious, head of the CalPERS health program, said the number of local governments joining CalPERS next year will balance out the membership lost from governments on the way out.
Fourteen local governments with a combined 8,317 members signed up for CalPERS after the pension fund announced premium increases and plans to drop hospitals.
"These figures represent a powerful endorsement of recent actions to stabilize our program and restrain costs," Grevious said.
In the north state, however, many local governments began plotting exit strategies as soon as CalPERS approved a plan in the spring to increase premiums by as much as 24 percent - roughly twice the average HMO rate hike for state employees.
The rate increases were more than many local governments could tolerate, coming on the heels of another savings plan that dropped HMO coverage at 24 hospitals statewide, including 13 in Northern California owned by Sutter Health.
"We are going to save $1 million by leaving CalPERS," said Z. Wayne Johnson, chief administrative officer for the Sacramento Regional Transit District. "And we are going to keep the local Sutter hospitals that CalPERS dropped."
In the current fiscal year, Regional Transit spent $7.7 million on health insurance through CalPERS.
By leaving, the transit district will pay only $7.5 million next year, compared to an $8.5 million price tag to remain with CalPERS, Johnson said.
The district will use Kaiser Permanente and at least one other HMO option next year.
The savings will come in part from shifting some costs to workers.
Starting next year, employees will pay 8 percent of premiums, while they pay nothing today. Also next year, workers will see their fee for emergency room visits double to $100.
And, employees' co-payment for generic drugs will double, too, to $10.
To Don Franks, 48, a mechanic for Regional Transit, the changes seemed reasonable.
"I know people who have to pay a lot more than 8 percent in health premiums - now. I would be worried if I had to go to a doctor and have to pay 20 or 50 percent of premiums," Franks said.
In Folsom, workers will have to wait to see what their coverage looks like, because the city left CalPERS without choosing alternative coverage.
"We budgeted for a 15 percent premium increase and CalPERS gave us 24 percent. That was the tipping point where we decided to leave," said Assistant City Manager Jim Estep.
Estep said he got quotes from two insurers, Health Net and Pacificare, that would allow the city to buy coverage at the same rate it currently pays CalPERS and keep four hospitals that the pension fund dropped from its HMO plan: Sutter Memorial and Sutter General hospitals in Sacramento, Sutter Davis Hospital and Sutter Roseville Medical Center.
If the city had remained in CalPERS, Estep said its $5 million health budget would have grown by another half-million dollars next year.
Governments had 60 days after CalPERS announced its HMO rates June 16 to notify the pension fund if they planned to drop coverage.
It was too little time for some local officials to get needed approvals from unions, city councils, school boards and other governing bodies.
Agencies that leave must stay out for five years, which many local government officials said made them hesitant to gamble that they could get good rates on their own for a prolonged period of time.
"We saw that five-year rule as a real disincentive to move out," said John Clark, the Yolo County deputy country administrator. "We did not have enough information at our disposal to decide to leave CalPERS for next year, but we are not happy with CalPERS."
The Bee's Lisa Rapaport can be reached at (916) 321-1005 or lrapaport@sacbee.com. Bee staff writer Marcin Skomial contributed to this report.