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Read Making a Killing

home / healthcare / in the media

ABC World News Tonight
Apr 21, 2002

by Carole Simpson & Neal Karlinsky

Increase in health insurance prices in California can affect rest of country

After the Federal government, the nation's biggest purchaser of health insurance is the California Public Employees Retirement System, known as CalPERS. Last week CalPERS accepted a 25 percent increase in HMO premiums for next year. The steep increase speaks to a serious problem facing companies and workers nationwide. Here's ABC's Neal Karlinsky.

NEAL KARLINSKY reporting: (VO) The HMO premium increase affects more than a million state workers in California. Steven Alari, who represents one of the state's largest unions, says that out-of-pocket costs to many will jump by more than 50 percent.

Mr. STEVEN ALARI (California State Employees Association): Some of our members are having their entire pay raise going to have to pay for this health care change.

KARLINSKY: (VO) This dramatic increase is an indicator that businesses nationwide, especially smaller ones, are about to face even higher health costs.

Mr. JAMIE COURT ( When Goliath gets slammed by the HMO industry, you can bet that the little guys are going to get it even worse and get crushed.

KARLINSKY: (VO) It's already happening. Siebel's Restaurant in Maryland is facing a 45 percent increase for its 19 employees. As a small business, they say health insurers make it clear they have few choices.

Ms. LYNN MARTINS (Restaurant Employer): Well, I said something about that this is outrageous and it was just basically, this is what it is. You either take it or you lose it. There's no bargaining. The only option you have is to take away coverage.

KARLINSKY: (VO) At Samsco Heating and Air near Atlanta, they were forced to do just that.

Mr. WALTER SAMS (Heating Company Owner): We could not pass those cost increases on to the employees because they simply couldn't afford it. And I as a business owner couldn't afford it either. So we had to drop the group health care plan.

KARLINSKY: (VO) Industry observers believe HMOs are passing along losses from investments on Wall Street. They say rising drug costs and bigger reimbursements at hospitals are also to blame.

Ms. HELEN DARLING (Washington Business Group on Health): Unfortunately, the American people do prefer to have comprehensive coverage, no cost sharing and access to everything they want. And so that's a recipe for soaring costs.

KARLINSKY: So this week's increase in California is being viewed as a warning. A warning that affordable health care will only come with reform. Neal Karlinsky, ABC News, Los Angeles.

SIMPSON: When we come back, making amends in Afghanistan.

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