CalPERS Dropped Two UnitedHealthcare Plans After Rate Hikes
The state dropped two HMO options as California public employees navigate annual benefit changes.
Updated on Sept. 22, 2026 in Healthcare
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California state employees have begun open enrollment for health benefits, while the state's pension system has removed two UnitedHealthcare HMO plans due to rejected price increases. The changes for affected members take effect January 1.
Why it matters
CalPERS chose to eliminate these plans after determining that proposed rate hikes of 21% and 23% were not justified by the provider. This move highlights how the system is leveraging its scale to push back against rising healthcare costs, which currently trail the national average.
The system dropped two UnitedHealthcare HMO plans affecting 94,000 members after the insurer proposed increases of 21% and 23%. While basic plan rates for active workers rose 5.78%, employer contribution rates increased by 3% to 4%.
The players
CalPERS
The California Public Employees' Retirement System, which acts as a massive purchaser of health benefits for state workers.
UnitedHealthcare
A national health insurance provider that manages HMO and Medicare plans for public and private sector clients.
Sutter Health
A California-based integrated health delivery system that provides hospital and physician services.
The details
CalPERS serves as the primary negotiator for state worker health benefits, setting rates that often benchmark against national trends. The agency replaced the two rejected UnitedHealthcare plans with options from Sutter Health. Employees must finalize their selections via the myCalPERS portal, as any currently active coverage remains in place for those who take no action.
Timeline
Open enrollment began in September 2026.
The open enrollment period ends October 9, 2026.
Benefit plan changes take effect January 1, 2027.
Market Landscape
This development follows a pattern established by the Affordable Care Act's scrutiny of administrative costs, where large purchasers reject premium hikes exceeding standard inflationary benchmarks. The state is signaling a departure from accepting routine increases in favor of aggressive cost containment.
Operators and benefit managers should watch for how this consolidation affects provider network availability and premiums. Firms should use this as a prompt to re-audit their own carrier renewal proposals against regional benchmarks to ensure proposed hikes are grounded in verifiable cost trends.
The takeaway
Large-scale buyers are increasingly willing to drop long-standing carrier partners when pricing exceeds perceived value. Business owners should review the justifications for their own upcoming insurance renewals and be prepared to solicit competitive bids if proposed increases lack clear cost-based support.
Further reading
For more on industry-wide insurance shifts, see our Healthcare coverage.
Source note: This article includes information reported by The Sacramento Bee.
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