Kaiser Permanente To Offer High-Deductible Plans In Response to 10% Premium Rate Increases

Oakland-based HMO Kaiser Permanente said Wednesday that it will begin offering high-deductible health insurance plans that could reduce monthly premiums by more than 50%, the Orange County Register reports (Wolfson, Orange County Register, 4/29). Beginning Thursday, Kaiser's Northern California division will begin offering a plan with a deductible of $1,500 for individuals. In July, the HMO will expand the offer to small employers, and in 2005 it will allow larger firms to offer the plans. The deductible will be $1,000 or less for plans offered by small employers and $1,000 initially for plans offered by large firms. Total out-of-pocket costs for members will be capped at $3,000 (Silber, Contra Costa Times, 4/29). Some preventive services, such as immunizations, vision exams and prenatal care, will not be subject to the deductible (Rapaport, Sacramento Bee, 4/29). However, the San Jose Mercury News reports that until they meet the deductible, members will pay "market rate" for doctor visits, laboratory tests and hospital stays. Members also will pay market rate for brand-name prescription drugs until they meet the plan's $250 deductible for such medications; generic treatments will cost $10 (Feder Ostrov, San Jose Mercury News, 4/28). Kaiser will continue to offer its traditional HMO (Orange County Register, 4/29).

Offering the new health plans is a "radical step for the nationally influential HMO, which has long prided itself on keeping out-of-pocket costs low," the Mercury News reports (San Jose Mercury News, 4/28). Christine Paige, Kaiser's senior vice president of marketing, said the HMO felt pressure to offer the high-deductible plans because it was losing members as premiums increased. "If we don't follow the market, people will lose access to care," she added (Contra Costa Times, 4/29). James Larreta-Moylan, a Kaiser manager of small group and individual plans, said, "There's a trade-off: If we want to lower premium rates, we can do so by raising out-of-pocket costs. If [members] stay healthy, that can be a savings." He noted that premiums have increased by as much as 10% annually during the past four to five years (San Jose Mercury News, 4/28). Karen Pollitz, a senior health policy researcher at the Health Policy Institute at Georgetown University, said the HMO's policy change is "too bad because Kaiser wrote the book on managing health care and disease. I think they just made their task a lot harder" (Contra Costa Times, 4/29).