Skip to content

Return to the Full Article View You can republish this story for free. Click the "Copy HTML" button below. Questions? Get more details.

Bill Aimed at Kaiser Hits Home Stretch

Proponents of a bill aimed squarely at Kaiser Permanente say the legislation is needed to level the playing field for health insurers setting premium prices in California.

Kaiser officials say they’re not playing on the same field and the attempt to put them there will be costly, confusing and ultimately a financial burden for Kaiser members.

SB 746 by state Sen. Mark Leno (D-San Francisco) would require insurers selling to large employers to provide detailed reports to state officials explaining pricing and justifying premium increases. The bill would require insurers contracting with two or fewer medical groups to provide additional information on cost increases, as well as claims data to large purchasers that request it.

Although the bill’s language is all-inclusive and uses no company names, it is clearly aimed at Kaiser, the largest health insurer in California.

“The bill language essentially says it applies only to health plans that contract with two or fewer medical groups. There aren’t too many that do that. In California, we’re the only one,” said Chris Stenrud, director of government relations and policy communications at Kaiser.

The bill has been approved by two Assembly committees — health and appropriations — and now heads to the Assembly floor. If approved there, it returns to the Senate for concurrence. The last day for bills to be approved this session is Sept. 13.

Premium Increases Sparked Bill

The bill’s author and proponents say the proposal was triggered by years of premium increases that went largely unchallenged in California’s regulatory process because state officials do not have the authority to deny rate increases.

Kaiser’s premiums for state employees have increased by 65% since 2007, according to CalPERS. Blue Shield of California’s rates have increased by 50% and Anthem Blue Cross’ rates have increased by 43% over the same period, according to CalPERS.

Earlier this year, Lisa Ghotbi, chief operating officer of the San Francisco Department of Health Service Systems, reported that Kaiser earned $87 million more from city workers’ premiums between 2010 and 2012 than it paid for their care.

State and federal law require insurers to provide data on rate increases in the individual and small employer markets, but there is no similar regulation for contracts with employers with 50 or more employees.

Because Kaiser is an integrated, highly capitated system, the data it provides are not comparable to data supplied by other insurers.  Proponents say new rules are needed to allow consumers — including and perhaps especially large consumers — to compare one insurer against another.

“When you go into negotiations with Kaiser, they say it’s a black box: ‘We can’t tell you how we got to the rate increase that we want,'” said Beth Capell, consultant for sponsors of the bill.

“We’re looking for the ability to compare Kaiser to other plans,” Capell said. “We understand the difference between Kaiser and other plans, and we’ve spent a lot of time and care to craft language for the bill that will take those differences into consideration.”

Cost of Collecting Data Compared to Revenue

Kaiser officials say the bill seeks a kind of data that do not have a place in Kaiser’s way of doing business.

“The kind of data this bill specifically seeks [are] fee-for-service claims,” Stenrud said. “Other health plans who charge by procedure are able to provide that kind of data. We aren’t. What this bill does is asks us to backward engineer our capitated budgeting.”

Stenrud estimated it “would cost us in excess of $10 million to get systems in place” to comply with the legislation. He also pointed out that the bill specifies that purchasers requesting data cannot be billed for the information.

That expense will have to come from somewhere, Stenrud said, adding “at the end of the day, it will hurt the customers who didn’t request it.”

Capell suggested $10 million — which she called an unverifiable, unjustified number — is not an unreasonable expense for a company of Kaiser’s size.

“Let’s put it in context,” Capell said. “What was Kaiser’s revenue last year? In 2011, it was $37.4 billion in California, according to CHCF (California HealthCare Foundation, which publishes California Healthline). And that was 2011, so we could probably add 10% to that to get last year’s revenue,” Capell said.

Capell helped craft the bill for three labor groups that sponsored SB 746 — UNITE HERE, United Food and Commercial Workers and Teamsters International.

Leno’s office lists more than three times as many groups in support of the bill as those opposed. The 34 supporters include large employers, consumer advocates, labor groups and government agencies. Opposed, along with Kaiser, are Health Net, state and national trade associations representing health insurers, and state and local chambers of commerce.

No Predictions

Neither side would predict the fate of the bill over the next two weeks. 

“I think it’s a very narrow piece of legislation and therefore not a lot of folks are particularly interested in it,” Stenrud said.

“In many ways it’s been under the radar. One of our concerns is that it might be like other legislation sometimes that doesn’t really get onto people’s radar screens until it becomes law and begins to effect consumers,” Stenrud said.

“We just want to free the data,” Capell said. “I know it can be done and in the long run it will benefit consumers.”

KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.

Some elements may be removed from this article due to republishing restrictions. If you have questions about available photos or other content, please contact khnweb@kff.org.