San Francisco officials hear steep 2024 jump in city health‑plan costs as HSS outlines drivers and RFP

San Francisco’s Health Service System (HSS) told the Board of Supervisors’ Budget and Finance Committee on Nov. 15 that city health‑plan costs rose sharply in 2024 and that officials are seeking market proposals and program changes to contain future increases.

“At 10.3% overall, that jump represented about $79 million and was approximately $31 million more than what was put in the budget,” HSS executive director Abby Yance said during a presentation to the committee. Yance said the agency will issue a competitive request for proposals for the city’s Medicare Advantage and PPO offerings to seek competitive pricing for 2025.

Why it matters: The city pays health benefits for roughly 126,000 covered lives through multiple plans that include fully insured HMOs and self‑funded PPOs. HSS staff and the city actuary told supervisors that roughly 2% of members (about 2,500 people) accounted for approximately 79% of medical spending—about $640 million of the city’s roughly $800 million medical plan cost.

What officials said: HSS attributed the 2024 increase to a confluence of factors: post‑pandemic wage and supply inflation in health care, higher demand for behavioral‑health services, rising chronic‑condition utilization, cost‑shifting as public payers lag reimbursements, and accelerating pharmacy costs (including specialty and GLP drugs). The agency also highlighted provider‑network complications: negotiatons between UnitedHealthcare and the UCSF Medical Group have stalled, creating administrative barriers for new patients and complicating network access for an estimated 4,000 members.

Questions and next steps: Supervisors asked for clearer projections of retiree counts and CMS reimbursement‑rate trajectories; Mike Clark, the city’s lead actuary, noted changes in Medicare reimbursement methodology reduced CMS increases to about 3.2% for 2024 versus a historical ~6% and that the differential magnified premium increases for city plans. HSS said the forthcoming RFP and renewal process will yield more granular bidders’ forecasts for 2025 that supervisors can use during budget deliberations.

Public comment and committee action: One member of the public spoke during the item. Chair Supervisor Connie Chan moved to file the hearing; the committee recorded three yes votes and filed the record of the hearing.

The committee asked HSS to return with additional data and to coordinate RFP outcomes with the city’s budget process.