You open your books, we'll open our wallets. That's the message officials of the California Public Employees' Retirement System and the Pacific Business Group on Health are considering sending to some of their contracting health plans. The PBGH speculates that several health plans will ask for hefty premium increases as part of ongoing price negotiations for 2000.
"We want to know why the premiums are going up as quickly as they are, and an audit of a health plan could tell us," said Patricia Powers, executive director of the San Francisco-based PBGH, which represents 500,000 workers through 33 employers. Powers said the group is in the midst of negotiations with a dozen health plans and estimated that premium increases for 2000 would top this year's average 8.1% jump.
The PBGH's premiums rose only about 3.8% for 1999, however, when Kaiser Permanente's increase-which was never divulged but generally was believed to be 12%-was subtracted. That low rise suggests a steep across-the-board increase for 2000, Powers said.
Recent studies have shown healthcare premiums are rising 7% to 10% nationally in 1999.
Oakland-based Kaiser requested double-digit increases in premiums for 1999 because of a $266 million loss in 1997. The increase proved to be the catalyst for audits, officials at the PBGH and CalPERS said. CalPERS, which provides coverage for 1.1 million public employees, retirees and dependents, is the nation's second-largest purchaser of healthcare behind the federal government. It granted Kaiser a 10.75% increase last year only after the HMO agreed to open its books. Kaiser covers 305,417 CalPERS members, making it by far the largest contractor among the system's 20 carriers.
"That audit was designed to hold Kaiser accountable to cost-cutting measures they promised in order to stabilize rates," said CalPERS spokesman Bill Branch. "Our biggest objection to the large Kaiser increase was that it came as a bolt of lightning, and we didn't want to get caught with that type of surprise again."
Officials at some of the larger health plans that do business with CalPERS and PBGH said they have not been approached about being audited. But one plan, Health Net, disclosed late last week that it had been audited.
"CalPERS is among our more important customers, and we are happy to cooperate with them," said Health Net spokesman Ron Yukelson. Woodland Hills-based Health Net is CalPERS' second-largest contractor, with 205,360 enrollees.
"We've worked with them on an individual basis in the past," said Tyler Mason, spokesman for Santa Ana, Calif.-based PacifiCare Health Systems, which covers 98,781 CalPERS members.
How much comfort CalPERS and the PBGH would gain from audits is questionable. The recently released Kaiser audit by CalPERS concluded that negotiations for 2000 rates would be "difficult despite the 10.75% premium increase granted for 1999."
CalPERS concluded that the 1999 rate increase was justified, but it asked Kaiser to develop more precise financial information to support future premium rate requests and to produce a specific plan for reducing operating costs. Kaiser agreed in its written response.