While one of the largest purchasers of healthcare services in California, indeed in the U.S., still is fighting a double-digit premium hike from Kaiser Permanente, a much smaller purchaser has given in without a battle, saying the increases are acceptable.
With little public fanfare, the Health Insurance Plan of California agreed to an average increase of nearly 13% for the three Kaiser plans with which it contracts. The rate increases take effect July 1.
The HIPC is a group purchasing program for small businesses that want to offer health insurance benefits to their employees. About 7,400 employers provide coverage to about 137,000 employees through the program.
The HIPC contracts with 23 insurance plans, which will raise premiums an average of 4.3% for pool employers, or one-third the hike granted to Oakland-based Kaiser.
Two other HIPC insurance contractors, Sacramento-based Omni Health Plan and Glendale-based Cigna HealthCare of California, received higher increases than Kaiser -- 17% and 15%, respectively. Four carriers decreased premiums an average of 2.4%.
"Small businesses have no defenses at all when it comes to the way premiums are set," said healthcare lawyer Sherwin Memel with Manatt Phelps & Phillips in Los Angeles, who follows insurance purchasing coalitions.
Memel suggested that Kaiser's market share through the HIPC might have put it in a strong negotiating position.
Kaiser has 51,000 enrollees through the HIPC, nearly 40% of the total in the purchasing pool and more than triple that of the next largest contractor.
The HIPC's chief deputy director, John Grgurina, disputed Memel's notion. He said the Kaiser premium increase is acceptable. The group evaluates premiums in a total of 48 categories for geographical regions, age groups and benefits. Kaiser's new rates consistently put it among the five least expensive HMOs offered, Grgurina said.
Grgurina added that Kaiser does risk losing enrollment with its new rates. Employees insured through the HIPC are allowed to choose among plans, although their employer receives a consolidated bill.
"The majority buys at the lower end, and those that raise their rates tend to lose business," Grgurina said. "Kaiser gener-ally was in the lowest tier of pricing, and they're still in the low to medium tiers."
Jack Hudes, Kaiser's vice president for sales and marketing in California, acknowledged the increases could cost Kaiser business, but he said the HMO has no choice.
"This is not a strategic move to reposition our price . . . this is for the purpose of covering the cost of quality medical care for our members," he said. Kaiser lost $270 million in 1997, partly because its prices weren't sufficient to cover medical costs.
In contrast to the HIPC, the California Public Employees' Retirement System recently refused Kaiser's request to raise premiums by 12% next year.
More than 1 million state employees and their dependents obtain health coverage through CalPERS.
CalPERS said it would accept a 5% premium hike from Kaiser, but it is moving to block new enrollment in Kaiser by CalPERS enrollees (April 20, p. 28). Kaiser and CalPERS have held discussions on the matter, but both sides say they will not yield.
Hudes said he considers it critical to obtain the premium increase from CalPERS. "If we discount rates to CalPERS, we would have to spread (the costs) to someone else, such as small groups and individuals, and that's not part of our mission," he said.