Health-Care Costs Jump At Calpers; Big Premium Increase May Signal Trend
Foundation for Taxpayer & Consumer Rights Corporateering
  Home | Volunteer | Donate | Subscribe | FTCR Websites | Books | Site Map   
Main Page
Press Releases
In the Media
Factsheets
Reports
Medical Malpractice Stories
HMO Arbitration Abuse Report
Casualty of the Day
 
 OTHER TOPICS
 - Corporate Accountability
 - Insurance
 - Citizen Advocacy
 - The Justice System
 - Billing Errors
 - Energy
 - About FTCR


Read Making a Killing

home / healthcare / in the media

The Washington Post
Apr 17, 2002

by Ceci Connolly, Washington Post Staff Writer

Health-Care Costs Jump At Calpers; Big Premium Increase May Signal Trend

Health insurance premiums for California's 1.2 million state employees and retirees are likely to jump a record 25 percent next year, officials said yesterday, delivering an ominous warning for the rest of the nation about rising medical costs.

In a final vote scheduled for today, the California Public Employees' Retirement System (Calpers) is expected to approve the price increase and also trim the number of health plans it offers its members.

As the second-largest purchaser of health care in the nation, behind the federal government, Calpers often acts as a bellwether for broader trends. Industry analysts predicted other states and private companies will follow with double-digit percentage increase in premiums, larger co-payments and fewer coverage options. "It's depressing if Calpers, with all its members and sophistication, is seeing increases this large," said Larry Levitt, vice president at the nonpartisan Kaiser Family Foundation. "Smaller businesses better hold on to their wallets."

The seven managed care plans serving Calpers submitted bids for 2003 with increases ranging from 15 percent to 41 percent, said Calpers spokeswoman Patricia Macht. The expected 25 percent increase would cost members $ 52 a month more.

In years past, the Calpers board has controlled costs through aggressive negotiations with insurers and innovative approaches such as inexpensive mail-order prescriptions, said board President William Crist. Last year, the bargaining brought the premium increase down to 13 percent and higher co-payments reduced it to 6 percent.

This year, the negotiations failed, and the board was reluctant to raise out-of-pocket expenses again. "We're just out of options," he said.

Insurers blamed doctors, hospitals and pharmaceutical companies for the latest increases. In addition, California laws on staffing ratios and earthquake-related building structural improvements forced costs even higher, said Kaiser Permanente spokesman Jim Anderson.

Medical research and an aging population also push up rates, Crist said. "It's a confluence of negative forces," he said. "And it's not just in California, it's nationwide."

Several analysts agreed, although they cautioned that Calpers may be on the high end of the spectrum.

"Companies with different demographics, different geographics and a different plan design" may be able to hold increases down, said John Small, head of the health-care division at Towers Perrin consulting. High-tech firms with a young, healthy staff could save money by steering workers into less generous plans, he noted.

Paul Ginsburg, president of the Center for Studying Health System Change, said that if a group as large and innovative as Calpers was hit so hard, it will be difficult for other businesses to stave off the price increases.

"Employers will respond by creating financial incentives for employees to economize," he said. Those might include larger deductibles and tiered pricing similar to prescription drug packages that charge more for brand names than generic medications, he said.

All of that is bad news for patients, argued Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, a California-based watchdog group. "If Goliath is getting stepped on in terms of premium increases, then you can bet David is going to be obliterated," he said.

California officials were especially upset with Kaiser Permanente, the massive managed-care plan that serves 400,000 Calpers members. In a memo outlining the situation, Calpers analysts urged the board to reevaluate Kaiser's participation in the program.

"Kaiser's proposed rates are not only disappointingly high but also higher than justified target rates," the memo states. "Further, Kaiser's current approach appears to be to charge what it thinks the market will bear . . . counting on brand-name loyalty and its quality record to maintain its market dominance."

Anderson said the company is simply charging "what the real costs are." He could not predict what Kaiser plans will cost elsewhere but pointed out "the same drivers of costs are affecting everyone."


back to top

©2000-2004 FTCR. All Rights Reserved. Read our Terms of Use and Privacy Policy | Contact Us