CALPERS: Rate Hikes May Portend Health Care Inflation

      With its 1 million enrollees, CalPERS' 9.7% premium increase for contracted HMOs may be a harbinger of health care inflation to come -- the likes of which hasn't been seen since the early 1990s, American Medical News reports. Of the increases, which will take effect in January, the largest went to Kaiser Permanente, which was $288 million in the red last year and plans to increase rates between 10% and 20% in California. Lifeguard Inc. and Health Plan of the Redwoods also received double-digit increases, while PacifiCare, Cigna Healthcare and Maxicare received the lowest increase. Universal Care, a new, cheaper HMO, will be added the plan. While recognizing the need for HMOs to stabilize their finances, CalPERS criticized Kaiser and Health Net for reacting too slowly to increasing costs, which HMOs attributed to rising drug costs, legislative mandates, minimum hospital maternity stays and CalPERS' generous benefit package.

Vying for a Piece of the Pie
      Physicians, meanwhile, are waiting to see whether the increases will be passed on in the form of higher salaries. While some physicians note that contracts and incomes are locked into place for two or three years, HMO officials say they have or are planning to hike reimbursements. Blue Shield of California has increased capitation rates during the past two years, while Lifeguard recently increased reimbursements to primary care physicians by 5%. "If we can see it come down to us, then we will be a little more comforted by the increase," said Dr. Ronald Bangasser, medical director for the Beaver Medical Group in Redlands, which saw physician salaries drop by 30% over the past three years (Jacob, 6/7 issue).