The move will require up to 53,000 CalPERS members -- including at least 33,000 in the Sacramento area -- to find new hospitals and new doctors among the health maintenance organization's remaining 225 hospitals, or switch to a more expensive plan. The decision does not affect CalPERS members who get healthcare through Medicare.

"This is, in many ways, a bellwether action by CalPERS, which marks the future of where many large employers and health plans are going," said Peter Lee, chief executive of the Pacific Business Group on Health, a coalition of large California healthcare purchasers. "Unlike managed care of the '90s, which was about limited choice, this is about CalPERS allowing their enrollees to have a full range of choices but not having every employee subsidize individual consumers who want to make more expensive choices."

As a result, enrollees in the Los Angeles region could pay premiums as much as 19% less than the statewide rate; Northern California members could pay up to 11% more, CalPERS said. CalPERS opted for regional premiums in an effort to staunch the defection in recent years of municipalities and other government employers in Southern California to commercial insurers that offered better rates.