Under the new package, Blue Shield's rates will rise by 13.09 percent, while Kaiser's rates will increase 10.07 percent. Premiums for the System's Sacramento-area regional plan, Western Health Advantage, will go up by 11.8 percent. Medicare plan HMO premiums will rise by 24.98 percent.

For the System's preferred provider networks (PPOs), premiums will increase by 12.61 percent. Medicare PPO members' rates will rise by 6.77 percent.

"While we approved premium increases for 2007, we are not going to stop pushing for significant, lasting health care reforms at the local and national level," said Rob Feckner, CalPERS Board President.

Key factors affecting the premium increases include increased pricing demands by hospitals and physicians, higher prescription drug costs, the growing number of people with costly chronic conditions, and an aging population that requires more care.

The Board declined to increase co-payments for 2007, after hearing concerns by stakeholders that increasing co-pays will not correct the basic drivers of health care costs.

"We took a good first look at some new options," said George Diehr, Chair of the CalPERS Health Benefits Committee. "While we didn’t act on these proposals this year, we will continue to look for innovative ways to achieve quality health care at affordable prices."

In other action, the Board deferred until next year a proposal to start a third PPO plan called PPO Select. That plan design would have created a smaller, more efficient network of physicians, which might be well suited for rural areas where managed care is limited or nonexistent. The Board also shelved a proposal to redesign service areas in some rural counties. The Board did sign off on a plan that will expand and promote more PPO urgent care networks, and agreed to require PPO members to obtain prior authorization for expensive imaging procedures such as CT scans.

CalPERS spends $4 billion a year to purchase health care for 1.2 million members. CalPERS is the nation's third largest purchaser of health benefits after the federal government and General Motors, providing health benefits to State and public agency employees, retirees, and their dependents. For more information, please visit www.calpers.ca.gov.