HMO price hike slows for CalPERS

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The Daily News of Los Angeles

On Wednesday, the California Public Employees’ Retirement System – often considered a bellwether for health-care premiums – adopted the smallest HMO rate increase in six years.

After yearly double-digit increases since 1999, a CalPERS committee approved a rise in HMO premiums averaging 8.7 percent for 2006 – more than two percentage points lower than last year’s premium increase. Though the health care industry usually follows suit, some analysts say consumers should still expect premiums to rise by 9 percent or more next year.

“It’s good news, but it’s not great news,” said Larry Levitt, vice president of the Kaiser Family Foundation, a nonprofit research organization that is not affiliated with Kaiser Permanente. “Single digits are better than double digits, but most people out there are not going to get deals like CalPERS’.”

The pension fund’s size often helps when it comes to negotiating with profit-seeking health care plans. CalPERS is the third-largest purchaser of employee health benefits in the nation, providing coverage for about 1.2 million state employees, retirees and their dependents.

CalPERS expects to save up to $45 million under the new proposal that will take effect Jan. 1. Clark McKinley, a spokesman for the Sacramento-based system, said the smaller premium increase validates the decision last year to drop coverage at more than 20 hospitals that were overcharging.

For 2006, CalPERS’ Blue Shield members will have access to a new hospital network, which will include Hoag Memorial Hospital Presbyterian in Newport Beach and St. Mary Medical Center in Long Beach.

“We’ve been shaking the fruit on the tree to see what we can get,” said McKinley, who also noted that the CalPERS population tends to have more chronic illness problems than many groups of people have. “And there is a tremendous disparity in prices among hospitals, with the same procedures costing more money depending on where you go.”

As for where other health care companies go now that CalPERS’ 2006 premium increase is set, “you can’t assume you can transfer the exact rate,” said Kathleen McKenna, spokeswoman for Kaiser Permanente, the Oakland-based health plan that has more than 6 million members in California. “CalPERS is such a unique group.”

Preliminary analysis indicates that HMO rates will increase about 12.4 percent nationally in 2006, according to a recent study conducted by Hewitt Associates, a human-resources firm based in Lincolnshire, Ill. The percentage increase would be the lowest in more than five years. On a regional basis, Hewitt expects the Southwest and East to experience slightly higher rate increases, ranging between 13.5 percent and 15.8 percent.

Despite the moderation of rate increases, Hewitt’s study said companies continue to share more of the cost with employees. The number of companies offering $20 office co-pays increased to 25 percent in 2005 from 16 percent in 2004.

With California workers ultimately paying more for health care, the Foundation For Taxpayer and Consumer Rights called for a new program that would allow any California resident to have access to the same rates that CalPERS members get. Jerry Flanagan, who tracks health care for the Santa Monica-based nonprofit organization, said patients should have more options for lower-cost health care.

“Individuals will still see double-digit increases next year,” he said. “And while 8.7… is good news, CalPERS is taking advantage of their bulk purchasing clout. Consumers don’t have that.”

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