Leading Healthcare Reform Supporter Boasts Highest Insurance Rates in Southern California (Part 2 of 2)

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KPR-thumb4A few years ago, HCE profiled healthcare giant Kaiser Permanente. In the article, George Halvorson, chairman and CEO of Kaiser, spoke passionately about his organization’s efforts to reduce costs for healthcare consumers.

“The best care costs less,” he said. “If you have half as many heart attacks, half as many asthma crises … that’s better for the patients and costs less. The rest of healthcare is setting no goals and doing absolutely nothing in any systematic way in terms of preventive care.”

He also spoke extensively about the need to provide coverage for all members of society, especially children.

“We need kids covered so we can provide better care for kids,” he stated. “Once we provide better care for kids, the cost of care for those kids will go down and that will make universal coverage more affordable.

“We need care improvement in America. We spend twice as much per capita as any other country in the world and we still have 40 million people uninsured. In many areas, we have care outcomes that aren’t as good as the outcomes in other countries. We need to do better and we are only going to do better if we do that systematically.”

Halvorson’s past words echo loudly in the wake of a Los Angeles Times article in which reporter Chad Terhune revealed that Kaiser Permanente has some of the highest insurance rates in the state of California. As we covered in our last post, this revelation has brought out some of the system’s harshest critics, who believe that Kaiser is intentionally keeping its rates high to prevent the sickest patients from joining the system next year.

Kaiser is, of course, defending itself, saying it was caught off-guard by the cost of its insurance in relation to other providers. The organization is claiming that it still wants to enroll as many people from all income levels as possible and added that other plans could afford to be cheaper because they offer fewer choices of doctors and hospitals to consumers.

“We were surprised at what looked like very narrow networks from our competitors,” Bill Wehrle, Kaiser’s vice president of health insurance exchanges, said. “We don’t cut off any slice of our network.”

Wehrle makes an important point. Because Kaiser controls its entire spectrum of care, providing both insurance and care through its hospitals, physician offices, and insurance company, it can’t be as “selective” as Blue Shield or Anthem. Furthermore, it has a 40 percent share of the market, while Anthem Blue Cross has a 23 percent share.

Marian Mulkey, director of the health reform and public programs initiative at the California HealthCare Foundation, explains, “Blue Shield or Anthem could be a little more selective in putting together a network for this new market. Kaiser is one size fits all. The question now is, will people find Kaiser attractive enough compared to their other options? This could put pressure on Kaiser to be less expensive.”

Being self-contained, its strongest selling point so far, may end up working against Kaiser, Mulkey speculated. Whereas “other insurers may have more flexibility to add doctors and hospitals to their network as enrollment builds,” Terhune writes, “Kaiser has regretted being the low-cost option at times in the past and being overrun by too many members at one time…and could face the costly decision to contract with outside hospitals to absorb some of its overflow.”

“There is a lot of uncertainty about whether the healthy show up as well as the sick,” Wehrle said. “We are very competitive on rates in some regions, which is a pretty strong indication we are not trying to avoid anything. There is no question we want to grow in the exchange, and I think we will.”

He added, “We are focused on sustainable prices for the long haul. If you make a large mistake in this environment, it can be hard to recover.”

As healthcare executives, what is your opinion about Kaiser’s insurance-rates predicament? What does the system need to do in order to carry out the mission Halvorson so eloquently outlined to HCE a few years ago? Is Kaiser’s plight indicative of nationwide problems under healthcare reform?

-by Pete Fernbaugh

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